EPTD DISCUSSION PAPER NO. 41

Environment and Production Technology Division

International Food Policy Research Institute2033 K Street, N.W.

Washington, D.C. 20006 U.S.A.

April 1999

Also being published by the African Highlands Initiative

EPTD Discussion Papers contain preliminary material and research results, and arecirculated prior to a full peer review in order to stimulate discussion and critical comment. Itis expected that most Discussion Papers will eventually be published in some other form, andthat their content may also be revised.

STRATEGIES FOR SUSTAINABLE AGRICULTURALDEVELOPMENT IN THE EAST AFRICAN HIGHLANDS

John Pender, Frank Place, and Simeon Ehui

ABSTRACT

Low agricultural productivity, land degradation and poverty are severeinterrelated problems in the East African highlands. While the proximate causes of suchproblems are relatively well known, the underlying causes are many and complex, anddepend upon many site-specific factors that vary greatly across the diverse circumstancesof the region. Thus, no “one-size-fits-all” policy, institutional or technology strategy islikely to suffice to generate sustainable development. While common elements ofsuccessful strategies do exist, such as security and macroeconomic stability, theappropriate portfolio of investments in physical, human, natural and social capital willlikely be different in different circumstances.

In this paper, we argue that the appropriate strategy for sustainable developmentdepends greatly upon the “pathways of development” that are feasible in a given location.Development pathways represent common patterns of change in economic livelihoodstrategies, such as continued semi-subsistence mixed crop-livestock production orcommercialization of high-value perishable crops. We argue that such developmentpathways will be largely determined by three factors determining comparative advantage:agricultural potential, access to markets, and population density. Based on a typology ofsituations in the East African highlands using these variables, we develop hypothesesabout the potential pathways of development in different situations, and the policy andinstitutional requisites to achieve sustainable development of such pathways. We alsoargue that the choice of development pathway largely conditions the opportunities forparticular resource management technologies, and develop hypotheses about thetechnological strategies that may be feasible within particular development pathways.

We conclude the paper with hypotheses about the priorities for policy interventionto achieve sustainable development in the East African highlands. Among these, wesuggest that the highest priority for road and irrigation development should be areas closeto urban markets with high agricultural potential; that development of input and outputmarkets and credit systems will be most critical in such areas; that increasing foodsecurity through increased food crop production or other means is likely to be a key torealizing the potential for more commercial production; that subsidies on the costs oftransporting fertilizer to remote, high-potential, food deficit areas should be considered asa lower cost alternative to food aid; and that intensified and more private use of hillsidesand grazing areas for sustainable uses such as tree planting may have potential to achievemore rapid and sustainable development of lower potential areas. We emphasize thatthese are only hypotheses, and that policy research is needed to assess their validity indifferent contexts of the East African highlands.

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CONTENTS

1. Introduction............................................................................................................... 1

2. Agriculture in the East African Highlands ................................................................. 5Ethiopia ............................................................................................................... 5Kenya .................................................................................................................. 9Uganda .............................................................................................................. 13

3. Policies and Institutions Affecting Highland Development ...................................... 16Ethiopia ............................................................................................................. 16Kenya ................................................................................................................ 24Uganda .............................................................................................................. 28

4. Strategies for Sustainable Development................................................................... 35

5. Policy and Institutional Requisites ........................................................................... 46High External Input Intensification of Food Crop Production............................. 46Low External Input Intensification of Food Crop Production ............................. 52Intensification of Livestock Production.............................................................. 59Commercial Production of Perishable Cash Crops ............................................. 64High-Value Non-Perishable Perennial Crops ..................................................... 69Rural Nonfarm Development............................................................................. 71Emigration......................................................................................................... 73

6. Conclusions and Hypotheses ................................................................................... 74

References ..... .............................................................................................................. 80

STRATEGIES FOR SUSTAINABLE AGRICULTURAL DEVELOPMENT INTHE EAST AFRICAN HIGHLANDS

John Pender, Frank Place, and Simeon Ehui*

1. INTRODUCTION

In Sub-Saharan Africa, the nexus of population pressure, low and declining

agricultural productivity, and unsustainable use of natural resources threatens a

downward spiral of increasing poverty and land degradation unless effective strategies to

reverse the spiral are identified and implemented (Cleaver and Schreiber 1994). These

problems are particularly severe in the East African highlands. Average population

density is more than 1 person per hectare in the highlands and well over 2 persons per

hectare in many areas. Most farm households attempt to subsist on less than 1 hectare of

land and incomes of much less than $1 per day. Cereal yields are well below yields

attained in other parts of the world (averaging little more than 1 tonne per hectare for

most cereals), while yield growth has been slow or in some cases, declining over the past

several decades (Hoeckstra and Corbett 1995). Livestock productivity is also low

compared to other parts of the world. For example, milk yields are less than 4 liters per

day in the highlands (Winrock International 1992). These trends are all the more

distressing because agricultural potential is quite high in much of the East African

highlands, with sufficient rainfall and suitable soils to support much more intensive and

profitable agriculture than currently exists.

* The authors are, respectively: Research Fellow, International Food Policy

Research Institute; Economist, International Centre for Research in Agroforestry; andProgram Leader, International Livestock Research Institute.

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The problem of land degradation is particularly severe in the East African

highlands. Mining of soil nutrients and high rates of soil erosion contribute to low and

declining agricultural productivity and extreme poverty throughout much of this densely

populated region. Estimated soil nutrient losses exceeded 80 kg of N, P2O5, and K2O per

cultivated hectare in 1983 in Ethiopia and Kenya, and were nearly 70 kg per hectare in

Uganda (Stoorvogel and Smaling 1990). Similar large negative nutrient balances have

been found at the district and farm scale in the highlands of Kenya (Smaling et al. 1997).

FAO (1986) estimated that one-half of the arable lands in the Ethiopian highlands are

moderately to severely eroded. Estimated soil erosion on cropland averages 42 tons per

hectare per year in the Ethiopian highlands, though it is much higher on steeper slopes

and for some crops (Hurni 1988). More than 6 million hectares of additional cropland

and pasture in the Ethiopian highlands may become unusable (with less than 10 cm of

soil depth left) between 1985 and 2010 if estimated erosion rates continue (Sutcliffe

1993). Although there is some controversy about the economic costs imposed by these

problems (especially erosion), a conservative estimate of the annual costs of soil nutrient

depletion alone is $100 million (Bojo and Cassells 1995). The gross discounted

cumulative cost of erosion in Ethiopia has been estimated to be as high as $1.25 billion

(Kappel 1996). Less information on erosion is available for other East African highland

countries, although it is clear that the magnitude of the problem is substantial in these

countries as well (Braun et al. 1997).

The proximate causes of these problems are well known (Bojo and Cassells 1995;

Sanchez et al. 1997): increased cultivation on steep slopes, inadequate vegetative cover

on croplands, deforestation, overgrazing, burning of crop residues and dung for fuel, low

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use of inorganic fertilizers or integrated nutrient management, declining use of fallow,

and limited adoption of soil and water conservation measures. Underlying these

proximate causes are many more fundamental factors, including population growth,

poverty, insecure land tenure, limited access to markets and credit, risks associated with

the use of inputs and new technologies, and limited farmer knowledge of appropriate

technologies in some cases. Government policies and institutions affect most of these

causes. For example, market liberalization, credit policies, input supply policies and

infrastructure investment have a large impact on opportunities to use inorganic fertilizers

(Bumb and Banaante 1996). Land tenure policies may affect security of tenure, land

fragmentation, and access to credit, and hence affect incentives and ability to invest in

land improvements or to use inputs (Place and Hazell 1993). Education affects

population growth and poverty. Education, research and extension policies can affect

farmer knowledge about specific natural resource problems (e.g., types of nutrients

required) and appropriate technologies to address such problems.

Given the complexity of factors influencing land degradation and the diversity of

situations existing in the East African highlands, no single package of technologies will

be able to address all of the problems. Similarly, no “one-size-fits-all” policy strategy

will suffice to generate sustainable development, although there will be common

elements to successful strategies in all cases, including macroeconomic stability, a

competitive market environment, land tenure security, and investments in physical,

human, natural and social capital. Much of what distinguishes different strategies will be

differences in the portfolio of such investments that are needed in different

circumstances.

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The objectives of this paper are to begin to identify such strategies, to suggest

what kinds of strategies are appropriate for different types of situations, and to consider

the policy and institutional requisites for these strategies to be successful. The

suggestions will be offered as hypotheses rather than as firm conclusions, since

substantial empirical research is still needed to investigate the feasibility and desirability

of the suggested strategies and supporting policy and institutional interventions.

In this paper, we argue that the nature of land degradation problems and

appropriate means of addressing them will depend upon the broader development

pathway that is pursued. For example, in areas where commercial crop production is

occurring, the potential to address soil nutrient depletion using large inputs of inorganic

fertilizer will be much greater than where production is likely to remain mainly

subsistence-oriented. The latter situation will require lower use of external inputs,

although opportunities for integrating small amounts of purchased inputs with local

sources of inputs should not be overlooked.

We also argue that the policy and institutional strategy, particularly the

appropriate mix of public and private investments, should be linked to the pathway of

development. For example, areas where a commercialization pathway is viable may

require development of input and output markets through private or public investment in

transportation and marketing facilities, credit, etc. Appropriately targeted and sustained

research and technical assistance will be important to all strategies, but especially where a

low external input (and knowledge intensive) pathway is pursued.

The appropriate development pathway depends upon the factors that determine

local comparative advantage. Three factors of particular importance in this regard are

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agricultural potential, population density, and access to markets. Accordingly, we

consider development pathways suitable to different circumstances along these three

dimensions, and present examples from the highlands of Ethiopia, Kenya, and Uganda.

In the next two sections we present a brief overview of the agricultural context

and the policy environment in each of these three countries. In section 4, we consider

possible development pathways for different situations and in section 5, we consider the

policy and institutional strategies to facilitate such pathways. In section 6, we offer

tentative policy conclusions and directions for further research.

2. AGRICULTURE IN THE EAST AFRICAN HIGHLANDS

As mentioned above, there is considerable diversity in agricultural potential and

the nature of agriculture across the East African highlands. Here we briefly consider the

situation in Ethiopia, Kenya, and Uganda.

ETHIOPIA

The Ethiopian highlands account for nearly half of the highlands of Africa, and

three-fourths of the highlands (over 1200 m.a.s.l.) of the three countries being considered

(Braun et al 1997). The highlands range in annual average temperatures from 20-22°C in

the lower elevations to 10-12°C in the higher elevations (3,000-3,400 m.a.s.l.). Annual

rainfall ranges from about 600 mm in the northern highlands to over 2,000 mm in the

southwestern highlands (Technical Committee for Agroforestry in Ethiopia 1990). Based

upon climate, three agroecological zones have been identified: the drought-prone low-

potential cereals (LPC) zone, mainly in the north (mainly 90-150 days growing period);

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the high-potential cereals (HPC) zone, mainly in the central highlands (usually more than

180 days growing period); and the warmer and more humid high-potential perennials

(HPP) zone in the southwest highlands.

The dominant soil types in the Ethiopian highlands are nitisols, vertisols,

cambisols and luvisols (ibid.). Nitisols dominate in the HPP zone. These soils have very

good agricultural potential, though their low phosphorus content and high capacity for P-

fixation makes addition of phosphorus a necessity. Vertisols and luvisols are most

common in the HPC zone. Vertisols have high nutrient retention and water holding

capacity, but they are heavy and difficult to plow, and prone to waterlogging in the rainy

season and cracking in the dry season. Cambisols and luvisols are most common in the

LPC zone; these soils are generally of poorer quality. The soils in much of the northern

and eastern highlands are very shallow, while soils are much deeper in the western and

southern highlands (Hurni 1988; Braun et al. 1997). There are of course substantial

variations within these zones.

More than four-fifths of the population of Ethiopia resides in the highlands, due to

the cooler climate, greater rainfall, and lower incidence of pests and diseases affecting

both humans and livestock. The highlands account for only 36 percent of the area of the

country. The average population density in the highlands is nearly 100 persons per

square km, including both urban and rural residents (ibid.). The infrastructure is very

poor. With only 0.4 km of roads per 1,000 residents (World Report 1998), Ethiopia has

among the lowest road densities in Africa (Ogbasellasie 1995; Ahmed and Donavan

1992), and most of the roads are in very poor condition. The railway line connecting

Addis Ababa to the port in Djibouti is very old and in poor condition. Less than 200,000

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hectares of land are potentially irrigable in the highlands, and the actual area irrigated is

much less than this (Ogbasellasie 1995). Education levels are very low; the rate of adult

literacy in the rural Ethiopia highlands (including Tigray, Amhara, and Oromiya, the

main highland regions) was only 15 percent in 1994 (CSA 1995). Postal and

telecommunications facilities are very limited, and electricity is virtually nonexistent in

rural areas. On the positive side, there has been substantial investment in grain storage

facilities in the past 20 years in response to the famines.

Agriculture in the Ethiopian highlands is dominated by very small scale mixed

crop-livestock subsistence farms, usually operating less than 1 hectare (Ogbasellasie

1995). Due to population pressure and several land redistributions conducted since the

fall of Emperor Haile Selassie in 1974, farms larger than a few hectares are rare, except

for state farms established by the Derg regime. The most important food crops are teff,

barley, wheat, sorghum, maize, and enset (“false banana”). The dominant cash crop, and

most important export of Ethiopia, is coffee. Livestock, especially cattle and small

ruminants, are very important in all parts of the highlands. Ethiopia has the largest

livestock herd in Africa, and the vast majority of these are in the highlands (Winrock

International 1992). Livestock are valued as a source of draft power, a store of wealth

and source of status, for the meat and milk they provide, and for their contribution to soil

fertility and household energy supply (dung) (ibid.).

Several major farming systems have been identified in the highlands, including

the enset-coffee-cereals-livestock system and the forest coffee-enset-livestock system at

middle altitudes (up to 2,500 m) in the HPP zone, the enset-barley-livestock system at

high altitudes in the HPP zone, the mixed cereal-livestock system in the middle altitudes

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of the HPC and LPC zones, and the barley-livestock system at higher altitudes in these

zones. Use of fertilizer and improved seeds is very low in all of these systems, although

these have been increasing rapidly in the past few years in the HPC zone as a result of a

large extension program to promote intensified cereal production. As a result of

population pressure, fallowing (for longer than the dry season) is rare. Farmyard manure

and crop residues are traditional sources of soil nutrients, but are becoming increasingly

scarce as shortages of fuelwood have necessitated the burning of dung and crop residues,

especially at higher elevations in the low-potential zone. Although use of inorganic

fertilizers has expanded rapidly in recent years as a result of a widespread extension

effort, only about one-third of Ethiopian rural households used fertilizers in 1995, and the

average level of use was only 11 kg per hectare, compared to 48 kg per hectare in Kenya

and 97 kg per hectare worldwide (Mulat et al. 1997; FAO 1998). As a result of these

factors, declining soil fertility is a problem in all systems, but especially in the LPC zone

(Technical Committee for Agroforestry in Ethiopia).

Soil erosion is a severe problem in sloping areas, especially in the northern and

central highlands where vegetative cover is very low and soils are already very shallow.

Erosion is most severe on cultivated lands, averaging 42 tons per hectare per year on

currently cultivated lands and 70 tons per hectare per year on formerly cultivated

degraded lands (Hurni 1988). Erosion is likely much higher where teff is grown on

sloping lands, because farmers plow several times to prepare a fine seed bed for this crop.

Conservation measures have been widely promoted throughout the Ethiopian highlands

(especially the northern highlands) through Food for Work projects and annual

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compulsory work campaigns.1 The emphasis has been on construction of physical

structures such as terraces and bunds. Evidence of the productivity impacts of these

structures is mixed. In more humid areas, they have not been found to increase crop

yields significantly (in some cases reducing yields), because they reduce crop area,

sometimes harbor pests, and other problems (Herweg 1992). In drier areas, such

structures have been found to have much more beneficial impacts on productivity

because they help to conserve soil moisture (Berhanu 1998).

KENYA

The Kenyan highlands stretch from the eastern slopes of Mt. Elgon southward

through Nyanza province to the Tanzanian border and eastward through a narrow section

of the rift valley and then expanding once more to cover the Aberdere range, Mount

Kenya, and environs to the south and east. In total, the highlands cover approximately 18

percent of the land area. The highlands generally include the better agricultural areas and

as a consequence population densities are high. It is estimated that 64 percent of Kenya’s

population resides in this relatively small area and many local areas have population

densities in excess of 1,000 inhabitants per square kilometer (Braun et al. 1997). Most

highland areas enjoy two rainy seasons, the long season from March to June and the short

rainy season from October to December. Average annual rainfall is generally over 1,200

mm with much higher amounts reported in the higher elevations near Mount Kenya. The

climate in the western highlands is warm year round with average temperatures of 21oC.

In the higher elevation central highlands, temperatures are somewhat cooler, with average

high temperatures reaching as low as 18oC in certain months of the year.

1 Currently 20 days of compulsory work are required per year in Tigray.

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Soils throughout the highlands are generally deep, well drained, clay-loams and

are considered of medium to high agricultural potential. Nitisols dominate in the central

highlands and are derived from volcanic rock. The central highlands are characterized by

moderate to steep sloping land and thus there is a need for soil conservation measures to

ensure continued productivity of soils. As discussed in more detail below, there are not

widespread problems of soil infertility in the central highlands due to the commercial

nature of agriculture and farmer reinvestment in land. In western Kenya, there is a major

problem of nutrient depletion in the otherwise high-potential ferralsols, acrisols, and

nitisols. For example, phosphorus has been found to be severely depleted (Olson P levels

below 5 ppm) in widespread soil testing (ICRAF 1997). In addition, some of the soils are

high phosphorus fixing, implying that much of the phosphorus in the soil is not available

to plants (Sanchez et al. 1997). Nitrogen is another major limiting nutrient and potassium

deficiencies are also reported. These are not inherent characteristics of the soils, but

rather a result of many decades of continuous cropping and nutrient export with little

nutrient input.

Throughout most of the highlands, land registration and consolidation exercises

had taken place in the 1960s. In central Kenya, the results of this were single-parcel

farms of between 3 and 8 hectares. In the sloping areas, these normally stretched from a

ridge down a slope to a bottom valley area. After a generation or so of land subdivision,

average farm sizes generally range from 1 to 4 hectares. Relative to other rural areas, this

region generates high agricultural income and households are able to educate their

children, many of whom take up jobs in the non-agricultural sector, partially easing the

pressure for land subdivision. The updating of titles following transfers of land is

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commonly practiced in this area relative to the western highlands (Place and Migot-

Adholla 1998). In the western highlands, farms are more or less the same size, with the

exception that in some of the most densely populated areas, farm sizes of below 1 hectare

are common. In both areas, the most common form of land acquisition is through

inheritance. Some purchasing of land takes place, but renting of land, though growing in

significance, has not traditionally been important. In both areas, there is much off-farm

activity as some family members will seek employment in the major cities.

Two important distinctions between the western and central highlands are the

higher elevation and closer proximity to Nairobi (and the shipping port) of the central

highlands. The higher elevation has permitted the productive cultivation of perennials

such as coffee and tea, and the proximity to Nairobi has provided a ready market for cash

activities such as dairy production. In the central highlands there is consequently a wide

range of both cash and food crops grown. The major cash crops are tea (in the higher

elevations), coffee, miraa (a stimulant), macademia nuts, fruit trees such as avocado, and

vegetables. The major food crops are maize, beans, irish potatoes, bananas and an

assortment of vegetables. In addition, livestock production, mainly for milk, is extremely

important and in most areas over 80 percent of households own cattle (Minae et al.

1988). Consequently, sizeable land area is devoted to production of fodder, such as

napier grass (Murithi 1998).

Farmers market coffee and tea through cooperatives, the local tea and coffee

societies, and their widespread establishment has facilitated expansion of these

commodities. The area under tea production has steadily increased to where Kenya is

now the world’s second largest exporter of tea. Coffee production remains an important

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provider of foreign exchange but production levels have been more volatile. Dairy has

been a major growth industry both during the monopoly period of the Kenya Cooperative

Creameries (KCC) and since the liberalization of the sector in the early 1990s.

Horticulture is also important in the central highlands. Flowers are restricted to larger

farmers but smallholders are engaged in pyrethrum, tobacco, french beans, macadamia,

and other fruits and vegetables.

One of the benefits of the cooperatives was to provide credit for inputs and

sometimes other investments. This meant that as long as output prices were attractive,

farmers normally had the interest and capacity to apply fertilizer inputs to their cash

crops. For coffee, for instance, Kenyan farmers normally add nutrient inputs, as opposed

to farmers in Uganda. The access to credit also had spillover effects into other crops and

investments such as education. Thus, one of the features of the central highlands is the

development of a highly diversified and intensified agricultural system. There remain

poor households, but opportunities to improve livelihoods through agriculture abound.

The case of western Kenya is different. There are only isolated areas suitable for

production of cash crops such as coffee or sugarcane. There is a sizeable regional

demand from a large rural population and the presence of several small cities, but the

distance to the largest cities and key tourist areas is relatively long and transport costs

high. As a result, in comparison with the central highlands, the profitability of

agriculture has traditionally been lower and farmers have in turn reinvested very little in

agriculture. The general description is of low-input semi-subsistence farming systems.

Maize and bean systems dominate, but in some areas bananas are common and in others

sorghum and millet can be found. There is also some growing of cassava and sweet

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potato. The higher valued crops in the system are the vegetables such as french bean,

kale, cabbage, onion, pepper, and tomato. Tea is grown in some parts of the western

highlands, though not as common as in the central highlands. Livestock (particularly

crossbreeds) are also not as common as in the central highlands, and are normally

confined to the wealthier households who utilize them for milk, manure, and sometimes

ploughing. Yields of most crops are low and households normally must buy additional

food to supplement production. In addition, acute demands for cash, for education fees

for example, force households into selling food crops at low prices following harvest and

buying them later at much higher prices. Western Kenya is a net importer of food.

UGANDA

The highlands of Uganda are mostly in the southwestern and western part of the

country and in the east. The highlands (above 1,200 m.a.s.l) account for 27 percent of the

land area of Uganda and 38 percent of the population (Braun et al. 1997). Population

density averages 105 persons per sq km, including urban and rural areas. Population

density is over 250 persons per sq km in parts of the southwestern and eastern highlands,

which are the higher altitude areas. The climate is relatively humid and moderately

warm, with annual average temperatures ranging from about 24°C at the lower elevations

to 15°C at the higher elevations (over 3,000 m.a.s.l.). Annual rainfall ranges from about

1,000 mm to over 2,000 mm, and there are two growing seasons with over 180 growing

period days in nearly all of the highlands.

The major soil types in the highlands include ferralsols in the Lake Victoria

crescent and andosols, lithosols and nitisols in the southwest and east (Braun et al. 1997).

Ferralsols are moderately deep and fertile, but with high acidity. Andosols are

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moderately deep to deep and highly fertile. Nitisols are deep with moderate fertility but

high acidity. The nitisols of the region are capable of supporting continuous cropping by

renewing soil fertility through weathering (Hoekstra 1988).

Many rural areas of Uganda are relatively accessible by roads, and the density of

roads and railroads—about 1.6 km per 1,000 persons (U.S. Library of Congress 1992), is

relatively high compared to many other African and Asian countries (Ahmed and

Donovan 1992). However, many of the roads are in poor condition. Rail service to port

is unreliable, particularly through Kenya (World Bank 1996). In addition, the availability

of vehicles and transport services within Uganda is limited and expensive, and fuel costs

are high. Irrigation is little used in Uganda, despite the presence of sizeable wetland

areas (Place and Otsuka 1997). There is limited capacity of storage and processing

facilities, especially for perishable commodities (World Bank 1996).

Education has traditionally been given high priority in Uganda, though

educational attainment is low compared to more developed parts of the world. Adult

literacy was 57 percent in rural Uganda in 1992 (ibid.). There has been substantial

expansion of the public school system since the late 1980s, although many problems limit

the quality of education.

The major food crops produced in the highlands of Uganda include bananas and

plantains, maize, sorghum, finger millet, cassava, sweet potatoes, and various pulses.

Coffee is the most important cash crop, accounting for most of Uganda’s export earnings.

Cattle are important in parts of the highlands, but are found mainly on larger farms in

lower elevations where population densities are lower. Small ruminants are more

common at higher elevations (Hoekstra 1988).

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A wide variety of farming systems exists. Intensive banana, coffee and maize

production is common near Lake Victoria. Near Kampala, there is also increased uptake

of horticulture crops such as vanilla, passion fruit, and pineapple. Banana, coffee, cattle,

field beans, and maize are common in the western highlands. North of Jinja, fewer

bananas are produced, and finger millet, cassava, and maize are common. Annual food

crops dominate in the higher elevations of the southwest and include potatoes, a major

export from the region. In the eastern highlands around Mt. Elgon, coffee-banana-

cassava and banana-maize-coffee systems are common (Hoekstra 1988; Braun et al.

1997).

Most farms are less than 2 hectare in size in the Lake Victoria area and in the

montane food crop systems in the southwest and east. Farms are somewhat larger in the

cattle producing zones in the west, though still generally smaller than 15 hectare

(Hoeckstra 1988). Most farms are semi-subsistence in orientation, producing most of the

food supply for the household. Fallowing of one year or more is not practiced on smaller

farms, and is declining where there are larger farms due to population pressure.

Declining soil fertility is a problem across much of the highlands, as a result of

declining use of fallow, very low use of fertilizer, and limited use of manure. Low use of

fertilizer may be due in some cases to low yield response to fertilizers, which has been

found in many fertilizer trials (Braun et al. 1997). In some soils, accumulation of

nitrogen occurs in the subsoil, and deep rooting crops or trees may be very useful to

recycle nutrients into the topsoil (ibid.). However, low fertilizer use is also due to limited

availability and high costs of fertilizer. Contributing to these problems are information

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and marketing difficulties resulting from a weak extension service and high transport

costs of fertilizers, which come through the port of Mombasa.

Soil erosion is a serious problem in the densely populated and steeply sloping

highlands of the southwest and east (ibid.; Kamugisha 1993). Soil conservation measures

were widely practiced prior to the early 1970s, promoted by educational programs and

often enforced by local administrators. However, as a result of years of political turmoil,

breakdown in former administrative structures, and population pressure, soil conservation

is now much less common, and many of the older investments have been destroyed or

seriously deteriorated (Zake 1992).

3. POLICIES AND INSTITUTIONS AFFECTING HIGHLANDDEVELOPMENT

Here we consider the effects of recent changes in the policy environment on

development in the highlands, and the major policy and institutional constraints that still

appear to inhibit development potential.

ETHIOPIA

Since the end of the civil war in 1991, the Ethiopian government has taken great

strides towards liberalizing the economy and setting it on a path towards sustainable long

term growth. The exchange rate has been devalued and has stabilized, and the foreign

exchange market largely deregulated. Government spending and the money supply have

been held under control, bringing inflation to under 5 percent (World Report 1998). Tax

rates have been reduced and efforts undertaken to broaden the tax base. The banking

17

sector has been deregulated, and together with reduced inflation, this has allowed positive

real interest rates on savings to help mobilize savings. Private banks are now allowed to

compete with the Commercial Bank of Ethiopia, though the CBE still controls 90 percent

of the market. Most price controls, trade restrictions, and restrictions on the labor market

have been eliminated. Export taxes have been eliminated, except the coffee export tax,

which is a major source of revenue to the Federal Government. Privatization of nearly

half of the formerly state-owned enterprises has been completed (Ethiopian Herald, April

28, 1998), though most of the larger enterprises and state farms are still owned by the

state. These changes have contributed to strong economic growth, averaging 6-7 percent

per year over the past six years, and to elimination of the government deficit (World

Report 1998).

A key element of the new policy strategy is to decentralize political power and

administrative decisions from the Federal Government to the regions. Regional

governments now raise some of their own revenue and execute their own plans and

budgets, though a sizable fraction of their revenues still comes from the Federal

Government. Within the regions, local municipalities (woredas) have their own elected

councils and executive committees, responsible for developing their own plans and

budgets as well as implementing the policies of the Federal and regional governments.

Although woreda councils develop their own budget proposals, these must be approved

by the regional government; thus a substantial degree of authority is maintained at the

regional level. Below the woreda level are peasant associations, kebeles or tabias, which

are composed of a few villages. These are the lowest administrative units in Ethiopia,

and their local councils are supposed to develop their own plans, budget proposals, and

18

develop and enforce by-laws governing use of common resources, etc. According to

some informants, this process of decentralization is furthest advanced in Tigray, where it

has been built upon the philosophy and structures established by the Tigrayan People’s

Liberation Front during the civil war.

Although good progress has occurred, there still exist policy and institutional

constraints to sustained development in the Ethiopian highlands. Chief among these are

unresolved issues about land tenure, limited infrastructure development, limited

competition in input supply markets, constrained access to rural credit, capacity

limitations in the research and extension system, and lack of coordination between

programs promoting increased agricultural production and programs promoting

conservation objectives.

Under the new Ethiopian constitution, all land is the property of the state, and it

may not be sold or mortgaged. The right of peasants and pastoralists of free access to

land is guaranteed. The constitution also guarantees the right of individuals to

improvements they make to land, including the right to bequeath, transfer, remove, or

claim compensation for such improvements if the right of use expires. Although the

constitution has resolved some issues, it seems to create other ambiguities and does not

address some important issues. Given the scarcity of land, it is not clear how peasants’

right of free access to land can be assured in practice, and what effect this may have on

tenure security of those currently possessing land. Nor is it clear how much land peasants

are entitled to. These issues have been left to the regional governments to resolve, and

there have been important differences across the regions. In Tigray, a new land policy

was established in 1997 stating that there will be no further redistributions of land except

19

where major infrastructure investments such as irrigation projects necessitates it. In

Amhara, by contrast, a general redistribution was just completed in 1998, and no policy

has been established regarding future redistributions. The Oromiya government is

reportedly considering a redistribution. Given these circumstances, tenure insecurity may

be more of a constraint to land improving investments in Amhara and Oromiya than in

Tigray.

Another issue that is up to the regions to decide is the policy towards land leasing.

Tigray’s new land policy allows leasing for up to two years for traditional uses, and up to

10 years if the lessee makes significant investments. There is reportedly no restriction on

lease terms in Amhara, while in Oromiya, peasants may only lease out half of their land

for up to three years. Such restrictions may constrain efforts to reduce land

fragmentation, limit farmers’ ability to obtain sufficient income from farming, limit

incentives to invest in land improvements, and constrain peasants’ ability to take

advantage of better economic opportunities outside of farming or in other locations. The

prohibition on land mortgaging in the constitution of course reduces farmers’ collateral

and hence reduces their access to collateral-based credit, though alternatives such as peer

group monitoring are possible and being used in Ethiopia.

Constraints on rural credit appear to limit use of purchased inputs and

investments. According to officials from different parts of Ethiopia, the demand for rural

credit greatly exceeds the supply. Part of the reason for this is undoubtedly the limited

development and capacity of rural financial institutions. Due to their politicization by the

Derg regime, many farmers reportedly prefer to avoid dealing with service cooperatives,

and few organizations have stepped in to provide rural credit. In many areas, non-

20

government organizations, such as the Relief Society of Tigray (REST), are the main

source of credit. Until 1998, maximum interest rates on loans by such institutions were

regulated by the National Bank of Ethiopia, although these restrictions have been

eliminated. Minimum interest rates on deposits are still regulated (6 percent), as are the

maximum loan sizes by rural financial institutions (5,000 Birr). The loan size restrictions

limit the usefulness of such institutions in financing investments and lead to small

lending volume per borrower and per branch, causing administrative and other fixed costs

to be high relative to the value of loans.

Absence of credit for marketing or other purposes also may constrain rural

development, farmers’ incomes and food security. Rural credit institutions currently

require agricultural input loans to be repaid at harvest time, forcing farmers to sell when

prices are low, rather than storing and selling when prices are higher and food is more

scarce. There does not appear to be any government policy inhibiting such institutions

from extending loans for a longer period (e.g., for one year rather than six months),

which could help to facilitate storage and orderly marketing. Allowing credit specifically

for marketing, storage facilities, and processing facilities could further promote the

development of a competitive output marketing system. The absence of credit for

consumption purposes, which serves as a form of insurance, also may inhibit productive

development (as well as food security) by causing farmers to be highly risk averse when

considering use of new technologies and inputs.

Credit constraints also inhibit investment in livestock. Few smallholder livestock

producers receive formal credit in Ethiopia (Freeman et al. 1998a). Freeman et al.

(1998b) have shown that a one percent increase in credit to purchase crossbred dairy

21

cows leads to a 0.6 percent increase in milk productivity on credit constrained farms and

a 0.4 percent increase on non-constrained farms in Ethiopia. Such differences in the

marginal productivity of working capital suggest that targeted livestock credit schemes to

those most in need could have important efficiency as well as equity benefits.

Limited infrastructure development is another major constraint. Three-fourths of

highland farm households lived more than a six-hour walk from an all-weather road in

the early 1980s, and the situation may be little improved today (FAO 1986). This

obviously restricts farmers’ ability to participate in market transactions, and explains the

predominance of subsistence farming in the Ethiopian highlands. Without improvements

in market access, impacts from price liberalization, improved technologies, and improved

availability of inputs and credit may be negligible for farmers in remote areas, because

high transportation and marketing costs renders their production essentially non-tradable.

The Ethiopian government and donors recognize the importance of the issue, and plans

have recently been announced to invest 19 billion Birr (nearly $3 billion) in road

improvements over the next five years (Ethiopian Herald, April 30, 1998). However,

these funds are reportedly to be used mainly for improving the highway system, not the

rural roads. An ambitious program to construct small-scale irrigation structures in

drought prone areas with good irrigation potential is also underway, under the

Sustainable Agriculture and Environmental Rehabilitation Program (SAERP) initiated by

the U.N. Economic Commission for Africa. This program initially planned to construct

500 microdams irrigating about 100 hectare each in Tigray alone, although the plans have

been scaled back as a result of capacity constraints and a more realistic assessment of the

availability of suitable sites. While decisions have been made about the general

22

magnitude of such infrastructure investments, important decisions remain about how to

target and implement them. In addition, better integration of different infrastructure

programs may be needed. There appears to be little integration of the road construction

and irrigation investment programs for example, even though these investments may be

highly complementary.

The limited degree of competition in agricultural input markets also may be an

important constraint to increased use of inputs. Presently, there are only three or four

suppliers of agricultural inputs, with the dominant one, the Agricultural Input Supply

Enterprise (AISE), owned by the government. There have been complaints by one of the

private suppliers about favoritism shown by some regional governments towards the

government supplier and its affiliates, though this is disputed by the regional

governments (Mulat et al. 1997). Much of the problem may be that input markets have

only recently been deregulated (the retail market was deregulated in 1997 and the

wholesale market in 1998), and it will take some time for competition to flourish. There

appears to be little involvement of traders or retailers in marketing agricultural inputs at

present. Part of this may be due to uncertainty and unfamiliarity of these agents in

marketing inputs, though transport costs and the need for credit to finance working

capital are probably also important constraints.

Investments are also needed to increase the capacity of the research and extension

system. Substantial progress has been made by the Ministry of Agriculture in

implementing the Sasakawa-Global 2000 approach to extension (emphasizing use of

fertilizers and improved seeds of cereal crops on 0.5 hectare demonstration plots), with

impressive results. Between 1995 and 1998, demonstrations were conducted on about

23

600,000 plots, in most cases more than doubling crop yields (World Report 1998;

Quinones et al. 1997). Extending this approach to a much larger number of farmers in

the highlands will require substantial investment in training staff and farmers, and likely

also some consideration of how to appropriately target and adapt these technologies

(especially in moisture-stressed environments). The long-term success of these efforts

will also require addressing the constraints to competitive input supply, credit, crop

storage, marketing, processing and diversification discussed above, lest farmers become

discouraged by unavailable inputs or rapidly falling output prices just as the program is

bearing fruit. In many ways, technological success will create more challenges for

policymakers than failure.

Another key issue is the need for greater integration of such productive

technologies with efforts to conserve soil and water. Many of these efforts are conducted

by separate programs with different objectives, resulting in poor coordination of the

approaches (Hans Hurni, personal communication). This is unfortunate, since the

complementarities between soil and water conservation and productivity enhancing

measures can be substantial. For example, the returns to soil and water conservation

structures will be much higher if they enable farmers to use fertilizer and improved seeds,

by conserving soil moisture and reducing losses of such inputs through runoff. This

complementarity of course also increases the returns to using fertilizer and seeds. To

realize these potential benefits, greater integration of these approaches is needed in both

research and extension packages.

24

KENYA

The Government of Kenya implemented a structural adjustment program

beginning in 1986 and elements of this program are still being carried out such as the

privatization of state enterprises. The reforms have targeted both macro-economic areas

as well as sectoral areas, including agriculture. The government relaxed foreign

exchange regulations and by 1995, the private sector could move currencies relatively

freely. Tariff rates were reduced on many goods and the import/export sectors were freed

up from excessive licensing restrictions. The shilling was allowed to be market

determined (with the typical stabilization influence by the central bank) and interest rates

were also freed to market forces. After the elections in 1992, the government ceased the

printing of money to finance government shortfalls and was forced into meeting

imbalances through borrowing. Following this, inflation has increasingly been under

control, averaging at or below 10 percent since 1996. Real interest rates, on the other

hand, increased dramatically as the government had to pay high interest rates in order to

raise the significant amount of funds it required. Much of the government debt was held

by commercial banks which tended to choke off domestic private lending. The high real

interest rates attracted foreign funds and this helped to maintain a strong shilling over this

time (1995-1999). The recent macro-economic indicators have generally been well

received by the World Bank and IMF.

The government has had difficulty in funding its planned public expenditure

program. Government revenues have almost annually been disappointing with much

evasion of tax. When the IMF also withdrew its financing mechanism, the government

has had to respond by reducing expenditures. This has meant that infrastructure

revitalization and development has been slowed. The El Niño rains of 1997-98 further

25

damaged the poor infrastructure. Funds for agricultural research and extension have also

been tight, and have relied to a large extent on donor support. The government has

reduced costs by retrenchment in some ministries and in parastatals. The Kenya Revenue

Authority has also recently been given more latitude to collect taxes and in 1998 tax

collections actually exceeded target levels. The government has also introduced cost-

sharing mechanisms in many sectors such as education and health.

In agriculture, important policy areas include inputs, credit, output, research and

extension, land tenure, and land management. The agricultural input sector in Kenya has

been one of the bright spots. Even prior to SAP, Kenya had abandoned subsidies for

fertilizers and other inputs. Following liberalization, the government has slowly allowed

competition in the sector to grow. The fertilizer sector, though already quite competitive

relative to other countries in Africa, was decontrolled in 1990 and the number of

importers and distributors has reached 23 by 1997 (Nyoro 1999). In response, the

number of types of fertilizer on the market has increased four-fold. The seed sector also

involves several major firms that compete with the Kenya Seed Company. The

government has long had an interest in increasing the availability of credit to farmers.

State supported credit is channeled through the Agricultural Finance Corporation (AFC),

the Coffee Marketing Board, and the Kenya Tea Development Authority. The AFC

though does not lend to smallholder farmers (a farmer must have at least 5 hectares of

land). As in Ethiopia, lending to the livestock sector is constrained in Kenya. For

example, Freeman et al. (1998b) found that a 1-percent increase in credit for purchasing

crossbred dairy cows leads to 1.6 percent increase in milk productivity on credit

constrained farms and 0.9 percent increase in productivity on non-constrained farms.

26

Private financial institutions rarely lend for agricultural purposes and when they do, only

to large farmers with considerable collateral. Recent years have seen the launching of

micro-finance projects, but only a few have targeted agriculture. Despite these

mechnisms, it is estimated that only 10 percent of credit goes to agriculture while it

contributes over 30 percent of GDP (Mwangi 1999).

There has been increased devolution of control and participation in the marketing

of output by the state, but this has been a slow and rough process. Maize, the most

important food crop has been largely freed from government regulation. Price supports

and movement restrictions have disappeared. The National Cereal Produce Board

(NCPB) still exists with the mandate to stockpile foodstuffs for national food security,

but there is a thriving private sector that buys and sells maize throughout Kenya.

Moreover, the NCPB itself has become a commercial enterprise and has reduced staff by

65 percent between 1993-98 (Mwangi 1999). The Kenyan government is still highly

involved in the marketing of coffee, tea, sugar, and meat. Government parastatals are the

sole buyer for tea and coffee, which are especially important in the highlands. Producer

prices generally follow world prices and therefore Kenyan coffee farmers have not been

spared the shocks of volatile world coffee prices. Production of coffee fluctuates widely

in response to prices and as well to the speed of payment by the coffee board, which has

often been slow in the past. The Kenya Tea Development Authority, on the other hand,

has performed relatively well and tea area has continued to expand among smallholders

in Kenya. For both coffee and tea, marketing outlets are well distributed through key

growing areas in the highlands. The dairy sector had been tightly controlled by the

Kenya government through the mid-1990s, when restrictions of selling milk to the

27

parastatal, Kenya Co-operative Creameries (KCC), were eased. KCC now buys a small

share of total milk production and is in negotiation with a foreign firm to form a joint

venture. The state still has strong influence on prices and incentives for some crops

through their import policies, which in the case of maize, sugar, and wheat remain

politically influenced.

Research, extension, and other agricultural information services in Kenya, while

not up to the resource levels of Asian countries, compare favorably with other African

countries. Agricultural research has a legacy of emphasizing cash crops for the larger

farmers, but the Kenya Agricultural Research Institute has now decentralized into many

locations to focus on the particular needs of smallholder farmers in those areas. Kenya

has pursued the Training and Visit approach to extension and this has had poor results in

some areas due to low extension worker to farmer ratios and limited transport resources.

The government, however, is a supporter of new approaches and has facilitated the

introduction of the catchment approach for soil conservation and the many innovative

methods used by an array of NGOs.

Land tenure is largely secure for rural households and this is particularly the case

in the highlands. Thus, farmers’ willingness to invest is not hampered by uncertainty of

land rights. The government has also spearheaded efforts to promote sustainable

agriculture through the establishment of the permanent presidential commission on soil

conservation and afforestation. In response, production and distribution of tree seed and

seedlings was actively promoted and farmers throughout the highlands continue to plant

trees for various purposes. The Ministry of Agriculture embarked on an ambitious soil

conservation program in the late 1970s and the National Soil and Water Conservation

28

Program is recognized globally as one of the most successful conservation program, now

reaching 100,000 farmers per year.

Kenya has long adopted a strategy to increase local level planning. Thus, sectoral

plans are developed with inputs from district level plans. While this decentralization has

been in place for some time, unlike in Uganda and Ethiopia, there has not been much

movement towards actual devolution of power. The executive branch retains most

political power and continues to make appointments at local administrative levels and it

these appointments who provide most of the inputs into local planning. The state had,

until 1996, also appointed the directors of the Kenya Farmers Association. The executive

branch also develops strategic plans for the country. Recognizing the continued high

rural population growth rates and continuing miniaturization of farms, the government

has set a goal of becoming a semi-industrialized nation within the next few decades.

There will be considerable obstacles in meeting this challenge, and widening the tax base

to ease rates of taxation and interest will be among the first tasks. Public investments in

transport, energy, and communication infrastructure will also be required. There will be

keen competition for scarce funds from both the urban and rural sectors, most notably in

social programs for education and health.

UGANDA

Since taking power in 1986, the National Resistance Movement of President

Museveni has implemented one of the farthest reaching programs of structural adjustment

in Africa (World Bank 1994). After a brief experiment with foreign exchange and price

controls failed (inflation reached 380 percent by May 1987), the Museveni government

changed course and became an enthusiastic supporter of stabilization and adjustment, in

29

some instances moving the process faster than even expected by the IMF and the World

Bank (Nygaard et al. 1997). Foreign exchange markets have been completely liberalized

since 1993. The money supply and public spending have been tightly controlled,

domestic price controls have been eliminated, most quantitative trade restrictions have

been eliminated, the banking sector deregulated, many state-owned firms privatized, and

tariffs rationalized and reduced to some extent (ibid.; World Bank 1996). The

government is now investing in improving the nation’s badly deteriorated infrastructure,

as well as increasing investment in health, education and the agriculture sector.

The government has also moved forward with political reforms. A new

constitution was adopted in 1995, and the first direct presidential elections held in 1996.

Although political parties are not allowed, policymaking in Uganda is open and

participatory, contributing the government’s ability to build popular support for

implementing such difficult policy changes (Nygaard et al. 1997). The government is

now pursuing a policy of decentralization, giving greater control over the civil service

and local tax revenues to local councils at the district and sub-county levels.

These changes have brought some impressive results. Peace has been restored to

most of the countryside, and the government is popular even in some stronghold areas of

previous governments. Economic growth averaged more than 6 percent per year (in real

terms) between 1987 and 1996 (ibid.). Inflation has been brought under control, and is

now under 10 percent per year. The exchange rate has stabilized and substantial

international reserves have been accumulated since the early 1990s. Domestic

investment has increased. In 1996, the U.S. Agency for International Development

30

concluded that Uganda’s accomplishments were “better than anticipated,” creating “a

fundamentally different environment for economic growth” (ibid.).

Despite these accomplishments, major challenges remain to be solved. Poverty is

still severe in Uganda; two-thirds of the population live on less than $15 per month, the

minimum considered necessary to meet minimum food requirements (Ministry of

Planning and Economic Development (MPED 1997). Social and nutritional indicators in

Uganda are among the lowest in the world (Nygaard et al. 1997). The AIDS epidemic

has reached alarming proportions; an estimated 110,000 people died of AIDS in 1995,

and the numbers are projected to increase for the next several years (ibid.).

The problem of poverty is particularly acute in the rural areas. The benefits of

rural growth are not yet broadly shared in the countryside, where low-input semi-

subsistence farming still dominates. Since 1987, per capita incomes in rural areas have

increased less than 1 percent per year (Opio 1996), and food production per capita is still

below the pre-1971 level (World Bank 1996). A combination of dry weather and crop

disease pushed some rural communities to near famine conditions in 1997 (Nygaard et al.

1997).

There is substantial untapped potential in agriculture in Uganda. Yields on

research stations are twice as high for beans and five times as high for maize as on

farmers’ fields (MPED 1996). Fewer than 30 percent of farmers use improved seed

varieties and almost no farmers use fertilizer (ibid.). In part, this reflects low farmgate

prices resulting from high transport costs and marketing margins: in 1993/94, farm prices

averaged only 17 percent of retail prices for maize and 33 percent of retail prices for

beans (ibid.).

31

In recognition of this potential, the Government of Uganda has decided to pursue

a strategy of agricultural modernization as the linchpin of its strategy to eliminate poverty

and ensure sustainable and rapid economic growth. The overall objective of the strategy

is to transform smallholder agriculture from a subsistence to a commercial orientation,

with greater total factor productivity, lower unit production and marketing costs, greater

use of high yielding varieties and modern inputs, more diversified production of

commodities with higher value and higher income elasticities of demand, and increased

exports of traditional and non-traditional commodities (Government of Uganda 1998).

Some of the key priorities of the modernization strategy include investing in

infrastructure, increasing the role of the private sector in all commercial agricultural

activities, decentralizing government functions, improving research-extension-farmer

linkages, and implementing land reform.

With regard to infrastructure, the government has initiated a 10-year Road Sector

Development Program, which will invest an estimated $1.5 billion on road improvement

(ibid.). This will focus principally on the main roads, but also includes a component for

rural feeder roads. In 1998/99, the government will spend Shs. 25 billion (about $18

million) for maintenance of feeder roads, more than double the previous level, and about

Shs. 14 billion ($10 million) for rehabilitation of feeder roads. Despite these investments,

the level of investment in rural roads is much less than that called for in the original

version of the Modernization Plan (ibid.); consequently the state of rural roads is likely to

remain poor for some time to come. Steps are also being taken to reduce taxes that affect

transport costs; for example, the tax on petrol has been reduced by half (to Shs. 150 per

litre) since 1997. The government has decided not to invest in construction of irrigation

32

infrastructure, although it will finance development of irrigation information and capacity

building for smallholders in water harvesting methods.

Increasing the role of the private sector is a fundamental element of the

modernization strategy. The government has clearly indicated that it will not be involved

in the direct production or supply of agricultural inputs, in providing credit subsidies, or

in processing or marketing outputs. Agricultural research for commercial crops, such as

coffee, is to be financed increasingly by producers, and public extension services will not

be provided to commercial farms. The government hopes that the private sector will

develop largely on its own, facilitated by appropriate intervention to ensure peace,

security and a stable macroeconomic environment; and to provide necessary regulations,

infrastructure, and effective technology packages.

Another fundamental element of the strategy is the policy of decentralization.

Together with increased reliance on the private sector, this is associated with a reduced

role for the central government in agriculture. In line with this, the staff of the Ministry

of Agriculture, Animal Industries and Fisheries (MAAIF) has been reduced from 1,400 to

around 280. Local governments (districts and sub-counties) are now primarily

responsible for planning and implementing agricultural programs and projects. Under the

Local Governments Act of 1997, districts are now responsible for providing agricultural

extension, land administration, and protection of forests and wetlands, while sub-county

governments are responsible for provision of ancillary field services in agriculture, efforts

to control soil erosion and protect local wetlands, and enforce other local regulations

relating to natural resources and wildlife. Local governments are empowered to assess

33

and collect taxes and use revenues for their own purposes, with at least 65 percent of

locally collected revenues to remain with the sub-counties.

This decentralization holds great promise of making government programs and

expenditures more responsive to local priorities. This may mean, however, that

agricultural activities receive less priority than might be desired by the central

government, at least in the near term. For example, only three out of 32 districts whose

1997/98 budgets had been analyzed by MAAIF had allocated more than 3 percent of their

budget to agriculture (ibid.). In addition, there is a great need for the central government

to help develop the capacity of local governments to handle the many functions they now

perform. The central government will also need to be involved in programs and projects

having broader impacts across districts, such as development of highways and the

communications network. These needs appear to be adequately anticipated by the

government, although implementation will undoubtedly pose significant challenges.

Decentralization will play a major role in the process of improving research-

extension-farmer linkages. With extension now the responsibility of the districts,

extension priorities will be more in line with local priorities of farmers. The linkages

between the district extension agencies and the National Agricultural Research

Organization (NARO) have not been fully worked out yet. This is to be accomplished by

establishing Zonal Agricultural Research and Outreach Centres (ZAROC), which will be

involved in adaptive research and on-farm demonstrations. Despite the decentralization

of extension services, extension will be funded mainly by the central government. The

top priority in the agricultural budget plan for the next five years is extension services for

smallholders, with expenditures for extension expected to more than double, while

34

research expenditures will grow much more slowly (ibid.). This is because extension has

been neglected in Uganda, with spending on extension as a percentage of GDP lower

than in other Sub-Saharan African countries.

Land reform is another major priority in the Modernization Plan. The Land Act

of 1998 repeals earlier land laws; ensures security of tenure to owners of land held under

customary tenure, freehold or leasehold; ensures security of tenure to long-term

occupants of mailo land, and provides procedures for converting customary or mailo land

to freehold or leasehold tenure. In the past, there have been conflicting claims to mailo

land by occupants and owners, and the Land Act was intended to settle this issue. Long

term (longer than 12 years) occupants of mailo land are provided a secure and inheritable

use right, and rent is limited to be no greater than Shs. 1,000 per year (less than $1). This

appears to be intended to encourage mailo owners to sell their interest in the land to the

occupants, since the rents they receive are very minimal. In addition, the law provides

for a Land Fund to be established, to help smallholders and land occupants to acquire and

register land under secure tenure. Implementing this land reform will entail substantial

costs to finance land purchases, register or title land, adjudicate disputes, resolve

conflicts, etc. In the long term, the land reform may enhance tenure security and the

development of land markets, though in the near term it may create difficulties as the

procedures and problems are sorted out.

Other priorities for modernization include development of rural credit institutions,

development of agricultural input and processing industries, improving access to export

markets, fisheries and forestry development, and others (ibid). The Modernization Plan

also incorporates government activities related to these priorities, although funded at

35

much lower levels than road development, extension, research, or land reform. Despite

some expenditures on capacity strengthening in developing rural credit institutions,

limited development of the rural financial system will likely remain a drag on agricultural

development for the near future. Contributing to the problem is the very low rate of

savings in Uganda (only 1 percent of GDP in 1994 (World Bank 1996)), which also

limits the ability of the government to finance infrastructure and other investments

without large foreign grants or borrowing. Mobilization of rural savings, as well as

provision of credit services, will need to be a high priority of non-governmental

organizations and the private sector if these problems are to be overcome.

4. STRATEGIES FOR SUSTAINABLE DEVELOPMENT

Over the past decade, a consensus has begun to emerge about many common

features required for successful development strategies in Africa, most of them following

standard neoclassical prescriptions (Delgado 1995; World Bank 1994; Cleaver and

Schreiber 1994). General peace and security are needed to allow a climate favorable to

production and investment. Macroeconomic policies that ensure a low and stable

inflation rate are needed to reduce risks and allow development of the financial system.

Foreign exchange and trade policies should be liberalized to avoid a bias against tradable

goods. Competition should be allowed to develop in domestic markets to promote

efficient allocation of scarce resources.

Although this consensus is very helpful in encouraging governments to stop doing

things that have had negative impacts on development (such as foreign exchange and

domestic price controls), it is less helpful in providing guidance to governments on what

36

they should do. A useful general principle to guide government action is to undertake

those actions that yield high social net returns and that would not be done as well by

some other means in the absence of government action. According to this principle,

governments should intervene mainly to provide public goods (goods such as research or

rural roads whose benefits are largely nonrival and nonexcludable, and hence not

adequately provided by private markets); to address other market failures such as

externalities (such as caused by environmental pollution or water use), missing markets

(such as absence of credit and savings markets), and imperfect competition (such as

monopoly power); or to address equity considerations such as problems of deep seated

poverty.

To move from this general principle to specific actions, it is helpful to think of

different pathways of development that may be appropriate in different circumstances.

As mentioned in the introduction, the appropriate pathway of development depends upon

current and potential comparative advantage. The returns to alternative policy and

technology strategies in different locations will depend upon the potential comparative

advantages. For example, investments in research and extension linked to adoption of

improved cereal varieties and heavy use of inorganic fertilizer are likely to yield much

higher returns where rainfall is relatively assured than in drought-prone areas where use

of such inputs can be very risky. Highly labor intensive methods of soil and water

conservation, such as building terraces or composting, are more likely to be adopted in

more densely populated and less commercialized areas, where the opportunity cost of

labor is low. Adoption of animal traction technologies is likely to yield higher returns in

areas with heavy clay soils than in areas with light, erodible soils. Strategies relying on

37

heavy use of purchased inputs and credit are unlikely to be successful in remote areas

where high transport and marketing costs make subsistence agriculture the dominant

development pathway, even if they are able to cause substantial improvements in

productivity. Similarly, commercial dairy production is likely to develop in peri-urban

areas but not in remote areas.

Many factors combine to determine comparative advantage and the appropriate

response to it. We will focus on three factors that we believe are critical: agricultural

potential, access to markets, and population pressure. Agricultural potential is an

abstraction of many factors—including rainfall, altitude, soil type and depth, topography,

presence of pests and diseases, and others—that influence the absolute (as opposed to

comparative) advantage of producing agricultural commodities in a particular place.

There are of course variations in potential depending upon which commodities are being

considered. Furthermore, agricultural potential is not a static concept but changes over

time in response to changing natural conditions (such as climate change) as well as

human-induced conditions (such as land degradation). For simplicity of exposition,

however, we will sweep aside these important considerations and discuss agricultural

potential as though it was a one dimensional and fixed concept. In reality, the multi-

dimensional and dynamic nature of agricultural potential should be considered when

developing more specific strategies of development than will be possible in this paper.

Access to markets is critical for determining the comparative advantage of a given

location, given its agricultural potential. For example, a community with an absolute

advantage in producing perishable vegetables (i.e., total factor productivity in vegetable

production is higher there than anywhere else), may have little or no comparative

38

advantage (low profitability) in vegetable production if it is far from roads and urban

markets. As with agricultural potential, market access is also a multi-dimensional and

dynamic concept (distance to roads, condition of roads, distance to urban centers, degree

of competition, access to transport facilities, etc.), but we will treat it as a single

predetermined variable (though subject to change through investments in roads, for

example).

Population pressure affects the labor intensity of agriculture by affecting the

land/labor ratio, and may also induce innovations in technology, markets and institutions,

or investments in infrastructure (Boserup 1965; Ruthenberg 1980; Hayami and Ruttan

1985; Binswanger and McIntire 1987). Population pressure thus affects the comparative

advantage of labor intensive pathways of development, as well as returns to various types

of investments. We take average population density as an indicator of population

pressure, although one could argue that population density per unit of arable land would

be a better indicator. Absence of comparable data on this latter indicator makes it

difficult to use in practice, however. To some extent, differences in agricultural potential

will account for differences in arable land per total area of land (i.e., the fraction of arable

land is likely lower in areas with lower agricultural potential, controlling for population

density).

These three factors interact with each other in complex ways. Population density

tends to be higher where there is greater agricultural potential or greater market access,

since people have moved to such areas in search of better opportunities. On the other

hand, population pressure may have contributed to land degradation, reducing

agricultural potential from what it once was. Market access tends to be better where there

39

is higher population density, since the per capita costs of building roads are lower and the

benefits higher in such circumstances. Market access also tends to be better where

agricultural potential is higher, since the returns to developing infrastructure are greater.

Despite these interrelationships, there is still substantial independent variation of these

factors in the East African highlands. Given such variations, and the fact that these

factors change relatively slowly over time, it is useful to consider how different

combinations of these factors influence possible development pathways.

We can classify the situations of the East African highlands into a maximum of

eight types, considering “high” and “low” levels of each dimension. We recognize that

there is an unavoidable element of arbitrariness in defining these terms. “High

agricultural potential” refers to areas with more than 1,000 mm of annual rainfall, at

medium altitude (less than 3,000 m elevation), and with soils suitable for agricultural

production with minimum investment (excluding very thin soils, vertisols, highly acidic

soils, and those which are high P-fixing). This includes most of the highlands of Uganda

and Kenya, and most of the High-Potential Perennial and High-Potential Cereals zones of

Ethiopia. “High market access” refers to areas relatively close to an urban center and

with access to an all-weather road and transport facilities. Although relative to other

parts of Africa, population density is high in all of the highlands, we consider “high”

population density to mean greater than 175 persons per square kilometer. This includes

most of the highlands of Kenya and southwestern Uganda, and some of the highlands of

Ethiopia (Braun et al. 1997).

Examples of these categories are presented in Table 1. One of the possible

categories—high agricultural potential-high market access-low population density—is

40

Table 1 Possible pathways of development in the East African Highlands

Population densityAgriculturalpotential

Marketaccess High Low

High

Central Kenya, parts of WesternKenya, Eastern Uganda

- High input cereals- Perishable cash crops- Dairy, intensive livestock- Non-perishable cash crops- Rural nonfarm development

???HIGH

Low

Southwestern Uganda, parts ofWestern Kenya

- High input cereals- Non-perishable cash crops

Southwestern Ethiopia

- High input cereals- Non-perishable cash crops- Livestock intensification;

improved grazing areas

High

Parts of Central Tigray

With irrigation investment:- High input cereals- Perishable cash crops- Dairy, intensive livestockWithout irrigation investment:- Low input cereals- Rural nonfarm development

Parts of Northern Ethiopia

With irrigation investment:- High input cereals- Perishable cash crops- Dairy, intensive livestock

Without irrigation investment:- Low input cereals- Livestock intensification;

improved grazing areas- Woodlots- Rural nonfarm devt.

LOW

Low

Parts of Northern Ethiopia?

- Low input cereals- Limited livestock

intensification- Emigration

Much of Northern Ethiopia

- Low input cereals- Livestock intensification;

improved grazing areas

41

relatively uncommon, for obvious reasons. The opposite case—low agricultural

potential-low market access-high population density—also is relatively uncommon,

though examples may exist in parts of northern Ethiopia. There are parts of this region

with low agricultural potential and population density but high market access, such as in

central Tigray close to the major towns of Adwa and Axum. Areas with low agricultural

potential, low market access, and low population density exist in much of the northern

highlands of Ethiopia. Examples of areas with low-potential, high market access and low

population density include parts of southern and eastern Tigray close to the major towns

of Mekelle and Adigrat. Areas with high agricultural potential, high market access and

high population density include central and much of western Kenya, parts of southern and

western Ethiopia (especially non-vertisol areas close to Addis Ababa), and the highlands

near Mt. Elgon in the east of Uganda. Areas with high agricultural potential, low market

access and high population density include parts of the southern and western highlands of

Ethiopia, western Kenya, and much of southwestern Uganda. Areas with high

agricultural potential, low market access and low population density include much of the

southern and western highlands of Ethiopia.

Possible pathways of development in these different situations are also presented

in Table 1. Commercialization of perishable crops such as fruits and vegetables is

profitable (and is occurring) mainly in areas of high-potential and high market access.

Dairy production is also developing in the same regions, because of the high perishability

of milk and the need for adequate feed supplies, which can be supplied in higher potential

areas. Due to lower transport costs, feed markets can emerge in such areas, making it

possible to intensify dairy production. As feed supplies become available, intensive beef

42

fattening and poultry and pig production (where pork consumption is not prevented by

religious restrictions, as in Ethiopia) close to urban areas are also potentially profitable

opportunities, regardless of the agricultural potential of the area (Jahnke 1982). High-

value, but less perishable, crops such as coffee and tea are also being produced in some

areas of high market access, though the profitability of some of these crops are less

dependent on close proximity to the urban market than on proximity to processing

facilities. Increased production of cereals and other food crops based on high use of

improved seeds and fertilizer is being promoted throughout most of the highlands through

extension programs, although the potential for this approach is of course greatest in the

high-potential areas with good market access. Rural nonfarm development, strongly

linked to agricultural production through development of input supply and agricultural

processing industries and demand linkages for rural services, is also likely to contribute

substantially to development in high-potential, high access areas.

Areas with high agricultural potential but low market access have more of a

comparative advantage in producing high-value (relative to their volume) non-perishable

commodities (such as coffee or tea) that can be transported over relatively long distances.

Given the high costs and risks of depending on imported food into such areas, farmers are

likely to continue producing most of their own food crops until improvements in roads

and transportation services, as well as increased production of food crops in other

regions, allow imported food to be more economical and less risky. At this stage of

development, complementary linkages between crop and livestock production are

important, with animals providing a source of draft power, manure and food protein, and

crop residues an important source of feed (McIntire et al. 1992). Thus, intensified

43

livestock production may be beneficial as well, particularly in lower population density

areas with more available land to provide fodder. There is good potential for adoption of

purchased inputs, financed by sales of cash crops or livestock, as a way to improve local

food supplies as well as income. This can result from use of inputs on both types of

crops, and by freeing up land and labor from food crop production for cash crop

production. However, where perennial cash crop production is not yet well established or

not very profitable (but potential exists), the need for subsistence food production may

undermine the ability to take advantage of such cash crop potential. For example, the

Technical Committee for Agroforestry in Ethiopia (1990) reported that forest coffee

production was declining in high-potential areas of Ethiopia as a result of population

pressure and expanded food crop production. This is particularly likely to be a problem

in higher population density areas, since the subsistence food constraint is likely to be a

more binding constraint to cash crop production the more scarce land is (controlling for

agricultural potential and distance to market).

In lower potential areas, such as the moisture-stressed highlands of northern

Ethiopia, adoption of more input-intensive cereal production is still very limited, and

likely to remain so except where irrigation investments are being made. Where irrigation

investments are occurring and market access is good, commercial production of cereals

and cash crops such as vegetables is also feasible (and is occurring, for example, near

new microdams being constructed in northern Ethiopia). Increased production of cereals

and fodder in irrigated areas may also enable intensive dairy production to begin in areas

close to cities. Investments in irrigation are likely to yield lower returns in areas without

good market access, unless irrigation is used for production of high-value (to weight)

44

crops. As in areas of high-potential but poor market access, sales of such high-value

crops could help to finance purchase of agricultural inputs. Also as in that case, higher

population pressure in poor market access areas is likely to make adoption of such high-

value crops more difficult, due to the need to produce food locally.

In non-irrigated low-potential areas, the agricultural options are more limited.

There may be potential to build upon the soil and water conservation investments being

made in moisture-stressed areas, by promoting targeted and limited use of fertilizer and

improved seeds to the parts of the fields where soil moisture is greatest. However, such a

limited and adaptive approach is not presently being pursued. For this approach to be

economically feasible, sources of income to finance input purchases are needed. Where

population density is high, farms in such low-potential environments are unlikely to be

able to produce sufficient surplus to finance purchase of inputs. Thus this will be most

feasible closer to urban areas where off-farm sources of income are available, where rural

industries such as mining are developing, or where seasonal migration (or remittances

from permanent migrants) is common. In vertisol areas, as in many parts of central

Ethiopia, increased food crop production depends upon investments to address the

problems of drainage and waterlogging. While technologies have recently been

developed to address these problems (such as the broad bed maker), adoption is not yet

widespread (Gezehegn and Heidhues 1998). Factors inhibiting adoption of the broad bed

maker include appear to include inadequate training in its appropriate use, limited

availability of complementary inputs (especially seed and fertilizer), and low output/input

price ratios resulting from removal of fertilizer subsidies and poor infrastructure (ibid.).

45

In low-potential areas with low population density, expansion of livestock

production may offer development potential. Livestock convert low-value inputs into

higher value products such as meat and hides, and are relatively easy to transport to

market. Achieving this potential may require the strengthening of collective action

institutions which would encourage investments in improvements of grazing lands,

perhaps by planting and managing fodder grasses and trees. Tree planting activities in

degraded lands may also provide opportunities for significant incomes and welfare

improvement where market access is relatively good. In Eastern Tigray, for example,

one village (Echmare, in the Gulomakeda woreda) started allowing private tree planting

on degraded hillsides in 1992, through its own initiative. In contrast to the poor

management of community woodlots in the region, private management has been very

good (including watering the seedlings during the critical part of the dry season) and

survival rates are reportedly as high as 90 percent. Additional areas of the degraded land

have been allocated in almost every year since 1992, and households are now beginning

to harvest the mature eucalyptus trees planted in the first years, which are worth 30 to 50

Birr ($5 to $8) per tree. Visual observations suggest that each household has at least 20

trees surviving in each plot allocated, or at least 100 trees in total; representing a

substantial increase in household wealth in this village.2

The most difficult case for which to identify development pathways are areas with

low agricultural potential, far from markets, high population density and without

2 For purposes of comparison, an ox is reportedly worth about 900 Birr in this

village. Thus the increment in wealth represented by a mature stand of 100 trees wouldbe much greater than ownership of two oxen, which is a key indicator of wealth in theEthiopian highlands.

46

irrigation or significant off-farm sources of income. In some cases, particularly close to

forests (such as in parts of Eastern Tigray), bee-keeping is an economic activity. Small

ruminants can be efficient users of available fodder resources, and can be transported

long distances to market, though intensification of their use will be limited by availability

of fodder or grazing materials. Tree planting on degraded lands, as mentioned above, and

continued investment in soil and water conservation structures (particularly given

relatively low opportunity costs of labor and the greater benefits of such technologies in

drier areas) also may have significant potential to improve land productivity.

Nevertheless, these seem unlikely to solve the long-term poverty problem facing such

communities. Emigration is likely to be an important element of the strategy for survival

and development in these areas.

5. POLICY AND INSTITUTIONAL REQUISITES

The policy and institutional requirements of sustainable development will depend

upon which development pathways are pursued. Here we consider some of the critical

constraints affecting the pathways discussed in the previous section, and the policy and

institutional requisites to address these constraints. We also consider some of the

implications of these pathways for sustainable land management.

HIGH EXTERNAL INPUT INTENSIFICATION OF FOOD CROP PRODUCTION

The first requirement of this pathway is the availability of food crop varieties that

will respond well to fertilizer and other inputs in the conditions of the East African

47

highlands. The initial success of the Sasakawa-Global 2000 program in high-potential

areas of Ethiopia (Quinones et al. 1997), and the high maize and bean yields

demonstrated in research sites in Uganda (Nygaard et al. 1997), demonstrate the

availability of such varieties, especially for maize.

To have the broadest and most sustainable economic impact, promotion of such

technologies should account for local potentials and economic conditions as much as

possible. As discussed previously, small farm sizes and uncertain rainfall (especially in

moisture-stressed areas) can make allocation of half-hectare plots to new technologies a

very risky strategy. This is less of a concern where rainfall is relatively assured or

irrigation exists, but many farmers even in these circumstances still may prefer to adopt a

more gradual or diversified approach, which may be precluded by a fixed package

approach such as being promoted in Ethiopia. In addition, adaptive and participatory

research is needed to develop more targeted recommendations for integrated nutrient

management practices; taking into account available sources of organic matter, local

sources of phosphate rock, and potential for leguminous crops or trees (Quinones et al.

1997; Sanchez et al. 1997). The priority for such research in the near term should be

high-potential areas where this pathway is most feasible. For the longer term, continued

basic research is needed to develop varieties that are suitable under lower potential

conditions, such as in moisture-stressed environments or in acid soils.

Even without targeted nutrient management recommendations based on adaptive

research, agricultural extension programs can improve the usefulness of their efforts by

allowing a more flexible approach and learning from farmers. Although the fixed

package of Sasakawa-Global 2000 has demonstrated some impressive results, even more

48

impressive results might be possible if farmers are given more opportunity to experiment

with alternative mixes of inputs, and the results of such experiments are used to inform

the development of more site-specific recommendations.

The availability of inputs (especially seeds and fertilizer) must also be assured.

In some cases (e.g., in Ethiopia), inputs are sold by the extension program. While this is

attractive as a way of demonstrating the benefits of using such inputs, this is something

that can be as or more effectively provided by competitive input markets, at least to

places with good market access. The longer-term goal should be to promote development

of such markets. This is largely a matter of removing obstacles to such development,

such as eliminating foreign exchange and import restrictions, deregulating prices, and

avoiding interventions by local authorities in private marketing of inputs, as reportedly

has occurred in parts of Ethiopia. Mulat et al. (1997) estimate that improvements in the

competiveness of the input marketing system in Ethiopia resulting from such changes

could reduce the average farm level price for fertilizer (relative to unsubsidized prices) by

nearly 20 Birr per quintal (about 8 percent).3 Other positive efforts that can help develop

such competitive markets include investments in road construction and improvement and

facilitation of the availability of credit to private wholesalers and retailers to finance

purchase of storage and marketing facilities and working capital stocks.

In remote food deficit areas where substantial improvements in market access are

not likely in the near future, consideration of the most effective means to address poverty

and food security should include consideration of subsidizing the cost of transporting

inputs to these areas (perhaps by continuing government provision to these areas). Since

3 One quintal equals 100 kg.

49

1 ton of fertilizer can yield 3-7 tons of additional grain in higher potential areas (Mulat et

al. 1997), it is much cheaper to subsidize the cost of transporting fertilizer than grain

(through food aid) to such areas as a means of addressing food deficits. Subsidies are of

course costly and difficult to maintain as a long-term strategy, but are a lower cost

alternative to providing food aid to relatively high-potential, remote, food-deficit areas.

There also can be difficulties in targeting subsidies, if farmers try to resell the fertilizer to

other areas where fertilizer is not subsidized. This potential problem would be

minimized, however, if the subsidy were only on transport costs. The longer term

solution for such areas is to invest in improved infrastructure and transport services, but

people still must be able to feed themselves in the near term.

Of course, exporting substantial quantities of grains from remote areas is not

likely to be economical due to high transportation costs, and should not be promoted

through subsidies. For example, it may require a two-day round trip for a farmer to take

a quintal of grain by donkey to the nearest market from remote areas in Ethiopia. The

opportunity cost of this trip (including the farmer’s time and additional feed) could easily

be 10 to 20 Birr, possibly approaching 10 percent of the value of the grain sold. Probably

more important, farmers in remote areas may simply be unable to sell substantial amounts

of grain, even if they produced a surplus, due to limited ownership of pack animals and

carts. Thus, it is not a good idea to subsidize fertilizer imports to areas that are not facing

food deficits, since the impact will be to produce a local surplus and depress local prices.

In areas with high-potential and good market access, subsidies for inputs should

be avoided. Such areas are likely capable of producing and marketing sufficient surplus

production to pay for inputs purchased without subsidies. The main constraints to

50

increased input use in such areas may be limited access to credit and limited information

where extension systems have not functioned well, as in Uganda.

In moisture-stressed areas with otherwise suitable soil conditions (particularly

areas close to roads and markets), high priority should be given to irrigation investments

where irrigation potential exists. The drought prone areas of southern Tigray close to

Mekelle are a good example of such a situation, and in fact this is where SAERT is

focusing much of its investment in constructing microdams. In more remote areas with

irrigation potential, priority should be given to investments in roads as well as irrigation,

since marketing constraints may otherwise undermine the ability to reap the full benefit

of irrigation investments.

In all areas where a high external input pathway is pursued, development of rural

savings and credit institutions is critical to the long-run sustainability of the effort. As

discussed earlier, rural credit institutions are poorly developed in most of the highlands,

and practically non-existent in Uganda. Efforts to develop such institutions should focus

on areas where there is good potential for a high input strategy. The greatest immediate

need is of course for short-term credit simply to finance the input purchases. However,

where surplus production and trade is possible, marketing credit to allow farmers to store

and market grain during the dry season is also very important. Related to that, credit to

finance investment in grain storage and facilities is needed where inadequate capacity

exists. Adequate regulation of private grain warehouses, for example through licensing

and bonding, is also needed to assure quality and reliability of the grain stored. Given

such regulation, private warehouse receipts could serve as reliable collateral for

marketing or other kinds of loans. In areas with sufficiently large production and good

51

market access to support grain milling, credit or equity to finance such investments will

also be needed. The development of equity markets in the highland countries may be

helpful in this regard, as is maintaining a policy environment favorable to domestic and

foreign investment in industry.

The high external input pathway may facilitate more sustainable land

management. Investments in soil and water conservation will be more attractive to

private farmers since the value of land and the need to minimize losses of valuable inputs

through erosion and runoff will be increased. In addition to direct benefits where such

intensification occurs, indirect benefits in other areas can also result, as increased

supplies of biomass reduce pressure on forests and grazing areas, and increased incomes

provide alternatives to expansion of production onto marginal lands.

The impacts of this strategy on restoring soil fertility are not assured however.

Soil fertility can be restored through increased use of fertilizer together with greater

production of organic material. However, a net increase in soil mining may occur even

with greater use of fertilizer, as a result of increased losses through erosion, leaching and

quantities harvested. For example, recent estimates from western Kenya show greater

nutrient mining on farms where there was more commercial orientation in food crop

production, suggesting that the profitability of using fertilizers in food crops may be

insufficient to prevent such depletion (de Jager et al. 1998). Further research is needed

on this issue.

In summary, to fully realize the potential benefits of a high external input strategy

of increasing food production, adequate attention must be paid to factors affecting the

feasibility and profitability of input use, including infrastructure, extension, input

52

availability, credit, and marketing facilities. In some cases where persistent food deficits

exist, subsidies on the costs of transporting inputs should be considered as a lower cost

alternative to food aid, until these other constraints can be overcome (IFPRI 1995).

LOW EXTERNAL INPUT INTENSIFICATION OF FOOD CROP PRODUCTION

In lower potential areas without irrigation, the return to using external inputs,

particularly fertilizer, is likely to be much more limited. The strategy for intensifying

food crop production therefore must rely on a low (not zero) external input approach. In

moisture stressed areas, a critical need is to conserve and use the available soil moisture

as efficiently as possible, in combination with integrated use of limited amounts of

inorganic fertilizer with organic nutrient sources.

In northern Ethiopia, where the moisture stress problem is severe, soil and water

conservation structures such as stone bunds and terraces are very common, and there may

be good potential to increase production through better management of water and

nutrients where these structures exist. For example, it might be possible to significantly

increase production with limited risk by targeting use of fertilizer and manure in the

vicinity of conservation structures, where soil moisture is greater. However, the fixed

package approach of the current extension program has not encouraged such site-specific

experimentation. In addition, little adaptive research has been conducted to explore the

potential of such integrated approaches to conservation and productivity improvement.

Research is also needed to better understand the potential for improving soil

productivity through integrated use of organic and inorganic fertilizers in different

settings (Palm et al. 1997). Organic sources vary greatly in terms of their biomass

productivity and nutrient content, their interactions with soil moisture and inorganic

53

sources of nutrients, and their impacts on productivity; and these issues are not yet well

understood in Sub-Saharan Africa (ibid.). For example, application of organic materials

may reduce nutrient availability to crops by immobilizing nitrogen, especially if the ratio

of carbon to nitrogen in the organic materials is high. Organic materials can also increase

pest problems. On the other hand, they may increase nutrient availability by reducing

phosphorus fixation, and improve soil physical properties and water holding capacity. It

is also important to recognize that many organic “sources” of nutrients (such as crop

residues or manure produced from grazing crop residues) only recycle nutrients within

the farming system, and do not add to the stock of nutrients in the system. As important

as such recycling is to help slow the rate of nutrient depletion, it cannot restore soil

fertility. Biological nitrogen fixation by leguminous plants, uptake by trees of nutrients

that are unavailable to crops, and transfer of biomass from outside the farm do increase

the stock of nutrients available to the farming system, and can be very important

components of a low external input strategy. However, these strategies cannot

adequately restore phosphorus where it is depleted (Sanchez et al. 1997). Thus, some use

of inorganic fertilizer is an essential component of strategies to restore soil fertility and

increase agricultural productivity, especially where phosphorus depletion is a major

problem.

A critical constraint on increased use of organic material in low-potential areas is

the shortage of such material and high demand to use it for other purposes (particularly in

high population density areas) such as burning of dung and grazing of crop residues. It is

thus difficult to address the soil fertility problem in such areas without addressing the

larger problem of a shortage of biomass. One way to address this issue is to make better

54

use of degraded lands and communal grazing areas to produce biomass. As the

experience in the village of Echmare in Eastern Tigray discussed earlier indicates, there is

substantial potential to increase production of trees on degraded lands, helping to relieve

local shortages of wood for fuel and construction materials, as well as generating

substantial income and wealth. The key to success seems to be to provide the right set of

incentives. The community approach to planting woodlots has yielded limited benefits in

Ethiopia, whereas allowing individuals to receive private benefits from tree planting

(with secure tenure) shows promise of achieving impressive results. The regional

governments of Tigray and Amhara have been sufficiently impressed by the potential of

the private approach that they have made private allocation of wastelands for tree

planting a part of their land policies.

The impact of these new policies remain to be seen, but if they do result in a

substantial increase in tree planting and harvesting from wastelands, more manure and

crop residues can be recycled into crop production as fuelwood becomes more available.

As the general biomass shortage is reduced, the need for the most rapidly growing

species (generally eucalyptus) will decline, and other kinds of trees, such as fruit trees,

legumes, and fodder producing trees may become more attractive to plant. This will

increase opportunities for improving soil fertility and intensifying livestock production,

as well as generating income directly from tree products.

Improved management of pasture and grazing areas also could yield substantial

benefits. For example, area enclosures are being used to allow regeneration of natural

grasses and trees in many parts of the Ethiopian highlands. These are showing good

results in terms of regeneration, but there are common complaints from farmers that they

55

are not benefiting from the biomass being produced (where cut and carry or controlled

grazing systems have not been established). In addition, enclosures tend to increase

pressure on other unprotected areas, so the net impact on resource degradation is not

necessarily positive. To help ensure that positive benefits are achieved and felt by

farmers, more intensive management of grazing areas, such as planting and managing

improved grasses and trees, is needed. This could be approached by allocating such lands

for private grazing use or through better collective management of enclosures.4

Because of economies of scale in protecting grazing areas and risk spreading

advantages of using them collectively, privatization of such lands may not be optimal

(Baland and Platteau 1996). However, attaining the benefits of collective management

requires effective institutions at the local level. Such institutions do not necessarily arise

spontaneously, even when the net benefits of effective collective action are large (ibid.).

Government or other external intervention can help to catalyze the development of such

institutions, though this requires a cautious approach that respects local autonomy and

concerns. Heavy-handed intervention from external agents can undermine the

development of such institutions, causing increased dependency on the regulatory role of

such external agents, and possibly increased conflicts in the community. Research is

needed to better understand the conditions under which effective institutions for

managing grazing lands arise and become sustainable in the East African highlands, and

how governments and NGOs can help to promote rather than undermine this

development. Where this does occur, intensified livestock production, improved soil

4 More productive pasture areas are often allocated to private individuals in

Ethiopia.

56

fertility management, and increased incomes will also likely occur.

Organic sources of crop nutrients can also be generated on cropland. Many

practices have been developed for this purpose, such as hedgerow intercropping,

improved fallows, green manures, composting, and planting of fodder or multi-purpose

trees (Cooper et al. 1996). High population density and remoteness from markets favors

more labor intensive practices (such as hedgerow intercropping or composting) since

opportunity costs of labor are lower in such circumstances (ibid; Ehui et al. 1990).

However, the potential of such approaches is limited by the scarcity of water in the low-

potential highlands. High population density and small farm sizes will limit more

extensive practices, such as improved fallows and planting trees. In land scarce settings,

planting of trees may be most feasible in particular niches, such as in the homestead plot,

on bunds and on plot boundaries. However, planting on boundaries and bunds can create

problems by competing with crops for water and light on the owner’s as well as

neighbors’ fields (ibid.).5 There are also possibilities of temporal niches, such as

improved fallows during the short rainy season.

Despite these possibilities, the potential for increasing flows of organic nutrients

into food crop production from such sources is probably lower than the potential offered

by better management of grazing lands and wastelands, at least in lower population

density settings as in much of northern Ethiopia. In very high population density, low-

potential (non-irrigated) areas, the options for increased organic matter production are

5 These problems are particularly acute for eucalyptus, which has led thegovernments of some regions in Ethiopia to ban planting of eucalyptus in farmland. Thecompetition between eucalyptus and crops is one reason farmers may prefer to planteucalyptus in sole stands and near homesteads, rather than along field boundaries.

57

probably relatively limited. In such cases, development of woodlots, even on farmland,

may be a better option for sustainable land use and reducing poverty (particularly where

market access is relatively good and farmers have access to off-farm sources of income).

The ban on planting eucalyptus trees in farmland adopted by some regions in Ethiopia

may eliminate this as a feasible option, since eucalyptus is by far the preferred tree

because of its ability to grow rapidly, produce valuable products, and regenerate even in

very dry conditions.6 Furthermore, discussions with farmers suggest that many believe

that the ban is on planting any kinds of trees, and not just eucalyptus. In any case, it is

not clear why policies relating to planting trees in farmland could not be set by local

communities rather than regional or national governments, since the impacts are

localized.

Tenure insecurity on farmland may also undermine investments in tree planting,

manuring, soil and water conservation structures, and other land improvements. In the

East African highlands, this issue appears to be of greatest concern in Ethiopia where

land redistributions are still a threat (excluding Tigray). Problems of insecurity may be

greatest for women, who are normally producers of food crops, but who are often not

allowed to make decisions on long-term land investments, such as tree planting.

Restrictions on long-term leasing, as in the Oromiya region may also reduce such

investments where leasing is common. Land fragmentation, as is common throughout

much of the highlands, is likely a major constraint to investment in manuring, mulching,

6 It is not clear how well this ban is being enforced. One can readily observeeucalyptus trees planted in farmlands in various parts of northern Ethiopia. Nevertheless,the policy may be limiting tree planting by increasing the risks of doing so.

58

or other approaches requiring transport of bulky materials to distant fields.

Fragmentation may also prevent investments in land improvements such as planting fruit

trees or constructing soil bunds, since these may be subject to theft or damage by

neighbors if not easily supervised. For example, Olson (1995) reports cases of farmers in

the Kabale district of southwestern Uganda surreptitiously undermining terraces on plots

of their upstream neighbors, thus “harvesting” some of the fertile soil that had

accumulated in the terrace. Restrictions on land sales and leasing, as exist in Ethiopia,

contribute to the land fragmentation problem. However, the example from Uganda,

where such restrictions do not exist, suggests that reform of land policies would not

necessarily solve it.

Livestock grazing practices also can have a significant impact on the feasibility of

some kinds of land improving investments. For example, free grazing on farmland after

the harvest is common in much of the Ethiopian highlands. This likely limits the ability

of farmers to invest in planting many kinds of biological measures to control erosion and

restore soil fertility, since such measures may be destroyed by grazing or trampling.

Thus, improvements in management of farmlands may depend upon changes in the

grazing system and improvements in the management of grazing areas.

Other issues such as fertilizer and input credit supply are less important where a

low external input strategy is pursued than where a high input strategy is pursued, since

such areas will have lower demand for these inputs. Nevertheless, these areas should not

be neglected in this regard since the small amounts of inputs and credit they use may be

highly important. Other kinds of credit, particularly credit for productive nonagricultural

purposes (such as petty trading) and for consumption purposes may be highly important

59

in addressing problems of poverty and food insecurity. Development of road

infrastructure, storage facilities and the output marketing system will be less important to

such areas as suppliers of food, but critical to them as net importers of food.

INTENSIFICATION OF LIVESTOCK PRODUCTION

The most widespread technical constraint to intensified livestock production in

Sub-Saharan Africa is the availability of feed (McIntire et al. 1992; Winrock

International 1992). In the densely populated highlands, the prospects for relaxing this

constraint through increased forage production in farmlands is limited (except where

high-value dairy production exists), given the scarcity of land and food (McIntire et al.

1992). Except in less densely populated parts of the highlands, the potential for increased

fodder production in communal grazing areas and wastelands is also limited, as discussed

above. Imported feed and feed concentrates are likely to be of limited use, except in very

commercialized systems such as dairy production in Kenya. Thus, the prospects for

livestock intensification (especially in mixed crop-livestock systems common in

Ethiopia) may depend substantially upon the success of intensification of cereal

production, which can greatly increase the quantity and quality of crop residues available

as a feed source, as well as freeing up land to be used for increased forage production.

This implies that the policy and institutional requisites of cereal crop intensification

discussed above are also critical to livestock intensification.

Other important constraints to intensified livestock production in the East African

highlands include animal diseases, limited stock of improved breeds, limited availability

of veterinary services and other inputs, poor infrastructure, and limited market and

institutional development (Winrock International 1992). While it is desirable to address

60

all of these constraints wherever they are binding, priority should be given in the near

term to places where there is substantial commercial potential and where the feed

constraint is not binding. For example, improved dairy breeds are not likely to be used

where adequate feed cannot be assured or only limited commercial potential exists, given

their cost and greater demand for feed. Returns to investment in veterinary services,

infrastructure and marketing facilities will be much greater where commercial potential

exists and feed is adequate than elsewhere. Thus, such efforts should be targeted in the

near term to areas close to urban markets, particularly where dairy potential exists, since

the returns to this activity are relatively high (McIntire et al. 1992; Jahnke 1982).

Significant opportunities for export of live animals exist in East Africa, especially

in Kenya and Ethiopia. Traditionally animals are exported from these countries to satisfy

demand for live animals (especially small ruminants) in the Middle East. Therefore

policies to further facilitate export markets of live animals will be appropriate.

Development of the export markets will require significant investments in infrastructure

(e.g., ports and roads) as well as investment in research to improve feed availability and

the elimination of animal diseases. Further expansion of export markets for live animals

will diversify the source of export earning which are largely dependent on traditional

cash crops such coffee and tea.

Development of dairy cooperatives may be a critical component of a strategy to

develop dairy production in areas of high market access. Because of the bulky, highly

perishable, and easily contaminated nature of fluid milk, the transaction costs and risks

involved in marketing milk are very high (Staal et al. 1997). Dairy cooperatives help to

reduce risks and transactions costs facing individual producers by pooling risk, reducing

61

unit costs due to economies of scale in collection and transport, making inputs available,

and enhancing their bargaining power. They reduce costs faced by processors by

reducing milk acquisition costs and assuring the quality and reliability of the supply. In

addition, dairy cooperatives may contribute to the development of social capital; for

example, by investing in education and health facilities.

Dairy cooperatives have played a potent role in dairy development in Kenya. The

government of Kenya has promoted dairy development for many years through the

Kenya Cooperative Creameries (KCC), which acts as a stable market outlet for

smallholder dairy producers and private cooperatives. This undoubtedly contributed to

the success of dairy development in Kenya, but has had problems in recent years as poor

financial performance of KCC (due in part to policies of pan territorial and pan seasonal

pricing) caused delays in payments to private cooperatives and producers (ibid.). The

Kenyan government liberalized the dairy industry in 1992, eliminating KCC’s monopoly

on processed milk sales (but not on raw milk sales) in urban areas.7 This liberalization,

together with KCC’s difficulties, led to more rapid development of private dairy

marketing cooperatives (ibid.). Despite the liberalization, policy distortions continue to

inhibit the competitiveness of the dairy sector in Kenya, particularly the monopoly power

of the KCC (Staal and Shapiro 1994). Lack of credit to finance transport and processing

equipment, and excessive government regulation of private cooperatives may also be

important constraints (Staal et al. 1997).8 Further market liberalization and provision of

7 Although the restriction on selling raw milk in urban markets was not officially

eliminated by the 1992 liberalization, many private producers and cooperatives beganselling raw milk directly to consumers after that (Staal et al. 1997).

8 For example, all expenditures by cooperatives of over KSH 5,000 (less than$100) must be approved by the District Cooperative Officer, and approval of the Ministry

62

credit for the private marketing sector could help the cooperatives to develop even

further.

Dairy cooperatives are much less common in Ethiopia. Almost all milk is

marketed through informal channels in the Addis Ababa milkshed; only 12 percent is

sold to the parastatal Dairy Development Enterprise (DDE) (ibid.). As a result,

substantial differences in prices received by different producers and paid by different

buyers exist. Large producers receive higher prices than smaller producers, urban

producers higher than peri-urban, and all producers are willing to accept lower prices if

selling to larger and more reliable customers (ibid.). Controlling for these differences,

farmers with more capital are able to obtain higher prices than poorer ones. These

findings suggest that development of cooperatives could help promote smallholder dairy

development in Ethiopia, by helping to reduce transactions costs and achieving

economies of scale. The Smallholder Dairy Development Project, funded by FINNIDA,

has begun to promote development of milk groups for processing and marketing in peri-

urban areas of Ethiopia.9 Preliminary results from a recent survey of such groups suggest

that there are substantial variations in their performance and viability, influenced by

many factors (Nicholson et al. 1998). One factor that appears to be particularly important

is economies of scale; the largest group studied obtained the highest prices for dairy

products and was the most profitable (ibid.). Thus, changes in farmer attitudes towards

participation in cooperatives are likely to be an important determinant of their success in

of Cooperative Development is required to appoint and dismiss key cooperativemanagement positions (ibid.).

9 Perhaps because of the negative impression farmers have of cooperatives fromthe politicization of service cooperatives under the Derg, dairy cooperatives are called“milk groups” in Ethiopia.

63

Ethiopia. As in Kenya, removal of bureaucratic obstacles to cooperative development

and availability of credit could help facilitate cooperative development.10 Availability of

crossbred cattle also must be assured. Government provision of information about

market opportunities and prices and capacity building in cooperative management could

also be very helpful.

Development of other intensive commercial livestock enterprises such as beef

fattening and poultry and pork production is constrained mainly by the need for low-cost

feed, though religion also plays a strong role with regard to pork consumption. Where

domestic feed supplies are limited, avoiding restrictions on imported feed concentrates

could help such enterprises to develop. Once demand for such concentrates becomes

sufficiently developed, and domestic production of cereals increases sufficiently, local

production of feed concentrates may become profitable. Ensuring a policy environment

attractive to foreign and domestic investors could be an important element in facilitating

such development.

Development of such commercial intensive livestock industries would greatly

increase the availability of manure. Given the high cost of transporting manure, the

direct impacts on soil fertility would be limited mainly to areas close to the urban markets

where these industries develop. However, the increase in supply of such organic material

might be used to develop domestic industries supplying more concentrated fertilizer or

fuel, which could have a significant impact even in areas further from the urban market.

10 For example, government agencies in Ethiopia are reputed to have claimed

ownership of dairy processing equipment purchased by groups of producers under dairydevelopment projects (ibid.).

64

An attractive policy environment could also help facilitate investment in this type of

venture.

In more remote areas, focusing on increased fodder production (through increased

cereal production, forage crops and/or fodder trees) may be the greatest opportunity in the

near term. Given improved fodder production, there will be opportunities to promote

increased productivity in small ruminant production, particularly in lower population

density settings, together with improved grazing land management. Public measures to

control or eliminate animal diseases are justified in remote areas as well as commercial

areas for both efficiency reasons (due to the public goods nature of the investment) and to

address rural poverty and food insecurity.

COMMERCIAL PRODUCTION OF PERISHABLE CASH CROPS

Where there is very good access to markets and irrigation or sufficiently reliable

rainfall, intensive commercial production of perishable fruits and vegetables can be very

profitable. As with intensified livestock production, the ability to pursue this strategy

may depend upon the success of increased productivity of cereal production, though for a

slightly different reason. Risk averse farmers with very little land are usually reluctant to

gamble on new and highly risky crops, however potentially profitable, unless their food

security is assured (von Braun et al. 1991). Such assurance need not depend only on

local food production though. For example, small farmers in western Kenya are adopting

vegetable crops and importing maize from Uganda. Open trade policies thus can be very

helpful in allowing such commercialization to occur. Nonfarm income can also provide

sufficient food security to allow commercialization to occur (ibid.). But in cases such as

in much of central Ethiopia and parts of Uganda, where a potential comparative

65

advantage in cereal production exists, realizing that potential can be an important first

step towards enabling farmers to diversify into higher value products. Thus the requisites

of high-external input intensification of cereals also most likely help to promote intensive

production of perishable cash crops in such cases. At the same time, income earned from

such cash crop production can help farmers intensify food crop production, by enabling

them to purchase more inputs. Thus increased cash crop production and increased food

crop production may be mutually reinforcing strategies.

One important constraint may be lack of knowledge about such products,

especially their market potential. Technical assistance, emphasizing market opportunities

for different crops as well as crop management, can be very important. With fresh

horticultural products, local markets can quickly become saturated, causing dramatic

price declines.11 It is critical for farmers to be aware of the potentials and problems of

alternative crops, so that they can diversify their production. Information on prices in

local markets, announced over radio, could also be helpful.

Such technical assistance need not come only from government extension agents

however. In other parts of the world, farmers often obtain advice from other farmers,

input suppliers or traders. As the input marketing system develops, local suppliers will

become more knowledgeable and able to provide advice to farmers. Providing training to

suppliers as well as farmers could help this process. For some things, however, technical

assistance probably must be provided (or at least financed) by governments, due to

incentives facing private suppliers. For example, integrated pest management and

11 On a field trip to a microdam site near Axum in Tigray, farmers recounted how

the price of tomatoes fell from 8 Birr/kg to 2.50 Birr/kg and the price for peppers fellfrom 6 Birr/kg to 3 Birr/kg after the previous harvest.

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organic farming methods may not be adequately promoted (relative to their potential

benefit) by private input suppliers, since these methods may reduce their sales of

agrochemicals. Training is also needed on proper use and disposal of pesticides, which

are likely to be much more widely used where horticultural development is occurring.

Taxes on pesticides, so that their private cost reflects their social cost accounting for

negative externalities, would help to promote safer and more efficient use of pesticides,

while generating revenue for governments.

Another important role for the state in promoting horticultural crop development

is to open up international trade in seeds. The role for research on new varieties may be

more limited than for cereals or other major crops, due to the wide variety and relatively

small amounts produced of any particular horticultural crop.

Where irrigation is used in production of cash crops, conflicts may arise over

access to water and management of irrigation systems. Well functioning institutions are

needed to allocate use rights and enforce responsibilities. As with institutions to manage

grazing lands (discussed above), such effective institutions may not arise spontaneously,

but may be catalyzed by appropriate interventions by external agents (Baland and

Platteau 1996). On the other hand, external intervention may undermine the effectiveness

of local management and increase the potential for conflict (ibid.). Thus a careful

approach to promoting development of such institutions is warranted, taking full account

of local conditions and concerns before investing in irrigation schemes or identifying the

strategy to address issues of rights and responsibilities. For example, one microdam was

recently completed by SAERT in Tigray, even though the former users of land flooded

by the new reservoir have not yet been allocated any land in the command area. Such a

67

situation could cause serious difficulties to the households who have lost land and lead to

conflicts that undermine confidence in the overall effort, which otherwise appears to be

achieving impressive results. In other cases in Tigray, local community councils have

been very involved in such decisions from the outset, and land in the command area has

been allocated to all affected households; resulting in broad support for the effort.

Available input supply and credit to finance input purchases are of course

important for producers of horticultural crops, as they are for high input production of

cereals. Given the high expected returns to such inputs, linking future credit to

repayment of past loans can provide a strong incentive to repay. However, since such

crops are highly risky (particularly price risk), lenders may be reluctant to lend as much

as farmers desire where collateral is limited, as in Ethiopia where land cannot be

mortgaged. Where land can be mortgaged, farmers may be reluctant to borrow due to the

risk involved, even if the expected profits are high. Alternative institutional

arrangements, such as sharecropping and contract farming, can be used as a means of

reducing risks and obtaining access to short term capital.

Tenure insecurity, restrictions on leasing, and land fragmentation may limit

commercialization of perishable cash crops for the same reasons cited earlier in

discussing factors affecting investments in land improvement. These factors are

particularly important with respect to planting fruit trees, which of course require long-

term tenure security, and protection against theft or being cut for fuelwood. Where such

security is lacking, investments in fruit trees are likely to be limited to plots near the

homestead.

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Where there is potential for developing processing and/or export, the availability

of cold storage, processing and transport facilities may be critical constraints. The

availability of electricity is one factor that may constrain the development of such

facilities. Where electricity is not available, storage facilities and processors may use

diesel generators, although the costs may be high, especially where fuel taxes are high.

Commercial credit or equity capital also will be needed. Provision of infrastructure and

lines of credit for such purposes and maintaining a policy environment that facilitates

private investment are thus likely to be very important to achieve this potential.

Development of processing can also promote contract farming or cooperatives, since

processors will seek to assure themselves a reliable supply.

There is good potential for sustainable land management where horticultural

production is occurring, but there are also risks. Such high-value, labor-intensive

production may reduce pressure on land by providing farmers’ sufficient income on a

smaller area of land. It can contribute to agro-biodiversity and help to reduce pest

problems if used in rotations with primary staple crops (Pingali and Rosegrant 1995).

Horticultural production can encourage investment in soil conservation by increasing

returns to such investments. For example, Tiffen et al. (1994) found a strong association

between adoption of horticultural crops and construction of bench terraces in the

Machakos district of Kenya. The cash income generated by horticultural production also

provides incentive and ability to purchase fertilizers, which may restore soil fertility.

This effect is not assured, however, since multiple cropping of horticultural crops can

rapidly deplete soil nutrients even when increased fertilizers are applied. Education and

extension efforts can help to address such problems, though farmers may simply find it

69

too risky or costly to apply sufficient amounts of fertilizer to avoid this problem. Other

potential problems include contamination of soil and water and human health risks

caused by agrochemicals, and increased conflicts over water. Applied research and

extension related to integrated pest management, integrated nutrient management, and

water management are critical to minimize such risks and attain the greatest possible

benefits from this development strategy.

HIGH-VALUE NON-PERISHABLE PERENNIAL CROPS

Given the time lags required to receive the benefits of investment, expansion of

production of high-value perennial crops such as coffee and tea where land is scarce

depends upon first assuring food security. Since areas with a comparative advantage in

such non-perishable crops will tend to be further from markets than dairy or horticultural

areas, relying on imported food is likely to be more costly than local production.

Increased food production therefore must be high priority for such areas, with the goal

being elimination of local food deficits and freeing up of scarce land for the production of

higher value crops. The policy and institutional requisites thus include those discussed

earlier to achieve high input intensification of cereal production, including consideration

of subsidies on the transport cost of fertilizer in the near term until food deficits are

eliminated and income from perennial crop production is growing.

Many of the requirements for other commercial strategies mentioned earlier are

also important for high-value perennials. Investment in roads, land tenure security, and

land transactions (to reduce fragmentation) are critical. Research and extension to

promote use of improved varieties and improved management is needed. Some of this

can be (and is) financed by fees on commercial producers; however, there may still be a

70

need for public sector research and extension to reach small producers using low

technology methods, such as producers of forest coffee in Ethiopia. Promotion of private

nurseries (for example, through availability of credit) can be helpful. Credit to finance

inputs and purchase of tree seedlings can also be helpful. Development of processing

facilities and assuring adequate capacity utilization of such facilities is important,

especially for tea (von Braun et al. 1991). The need to assure a sufficient quantity and

reliability of supply to make such facilities profitable contributed to the attractiveness of

large plantations established by colonial settlers in Kenya. Development of alternative

institutional arrangements more appropriate to smallholder production, such as

cooperatives or contract farming, can help to achieve the same goals. Large processing

facilities are less necessary for coffee than tea if coffee is sold in unwashed form, but the

value-added in the local economy is reduced. To be able to tap this potential, substantial

investments in coffee washing facilities are now occurring in coffee producing areas of

Ethiopia (Ethiopian Herald, May 7, 1998). Maintaining a policy environment conducive

to development of cooperatives and such investments in processing are key to attaining

the potential of this strategy.

The benefits of development of high-value perennial crops for the sustainability

of land use can be substantial. As with annual horticultural crops, the income generated

can help reduce pressure to continue producing or expanding onto marginal lands and

allow greater use of inorganic fertilizers, while the increase in land values encourages

investments in land improvements.12 In contrast to annual cash crops, high-value

12 For example, coffee has played a key role along with horticultural crops in

promoting more profitable and sustainable land use in the Machakos district of Kenya(Tiffen et al. 1994).

71

perennials are a less erosive land use. Where coffee is grown in shaded conditions, there

is good potential to plant other kinds of trees for soil fertility management, fodder and/or

fruit production, increasing the benefits for land management and farm incomes. There is

evidence from western Kenya that soil fertility depletion is lower where perennial cash

crops such as coffee and tea are grown than where annual food crops are grown for

commercial purposes (De Jager et al. 1998). As with horticultural crops, however, there

are risks posed by increased use of agrochemicals in the production of such crops. Thus,

extension and training will play an important role in promoting appropriate practices of

integrated soil nutrient management and integrated pest management.

RURAL NONFARM DEVELOPMENT

In areas close to roads and markets, rural nonfarm activities are usually an

important source of employment and income (Delgado et al. 1994; von Braun et al.

1991). Where commercial agricultural production is expanding, as in central and parts of

western Kenya, linkages to agricultural input supply, processing, and trading are

particularly important. For example, off-farm income exceeds half of total income for

farmers in western Kenya (the proportion is higher for lower income farmers), and much

of this comes from small enterprises engaged in such agriculturally related activities

(Crowley et al. 1996). Thus many of the requisites for this strategy are the same as those

discussed above for the commercial agricultural development strategies.13

13 Other kinds of rural nonfarm development may be related to development in

mining, manufacturing (e.g., textiles and leather goods), and construction (related todevelopment in other sectors). These types of development have some of their ownrequirements, which will not be discussed in detail here.

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Beyond development of commercial agriculture, the key requirements for this

strategy include development of infrastructure (especially roads and electricity) and

transportation facilities, education and vocational training, availability of credit and

savings to help finance small startup enterprises and equity capital for medium and larger

enterprises (access to credit usually not a problem for larger enterprises). It is important

to maintain an environment conducive to investment; for example, by reducing delays in

licensing procedures, facilitating purchase or long-term leasing of land and buildings by

enterprises in urban and peri-urban areas, reducing taxes and broadening the tax base.

Restrictions on labor mobility caused by restrictions on land sales or leasing in rural areas

(as in Ethiopia) can also be an important constraint inhibiting migration of workers to

areas where employment demand is high. However, shortages of skilled workers

resulting from low education and inadequate training facilities is probably a more critical

constraint. High priority should be given to improved education in all areas, and to

establishing training facilities where potential for nonfarm development exists.

The impacts of nonfarm development for sustainable land management are less

direct than the effects of the agricultural development strategies, but may be larger and

more profound in the long run. Nonfarm income enables households to save and to

overcome capital market imperfections that may cause households to discount the future

heavily and limit their ability to invest in commercial crop production, inputs or land

improvements (Crowley et al. 1996; Reardon et al. 1996; Pender and Kerr 1998; Clay et

al. 1995). Such development can provide farmers an alternative to continuing depletion

of soil, forests and other resources (Pinstrup-Andersen and Pandya Lorch 1995). On the

other hand, nonfarm development may reduce farmers’ incentive to invest in land

73

improvement, by increasing the opportunity cost of their time (Pender and Kerr 1998;

Clay et al. 1995). It is thus important to promote less labor intensive strategies of land

management—such as planting trees rather than annual crops—in areas where nonfarm

employment opportunities are increasing the value of labor. Land policies that limit

farmers’ ability to plant trees—such as the periodic land redistributions, restrictions on

land sales and leasing (limiting ability to reduce fragmentation) and the ban on planting

eucalyptus trees in farmland that exist in parts of Ethiopia—may thus have a particularly

onerous impact where rapid nonfarm development is occurring.

EMIGRATION

Related to nonfarm development is the strategy of emigration, both seasonal and

permanent. Areas with low agricultural potential and low market access are likely to be

particularly large sources of outmigration, though emigration from all areas of the rural

highlands is likely given the high population density and small farm sizes. The feasibility

of this strategy depends largely upon nonfarm development; thus the requisites of the

strategy include the requisites of nonfarm development. There is also potential for

seasonal rural-rural migration within the highlands from low-potential areas to higher

potential or irrigated areas during the dry season, and in some cases there may be

potential for permanent rural-rural migration to reduce disparities in across locations

(though generally high population density throughout the highlands makes this difficult).

The need for education and training for people in areas of outmigration should be

emphasized. Land tenure is also a key issue affecting migration. People without secure

tenure are unlikely to risk losing their land by taking jobs in the city. The scope for

permanent rural-rural migration is also affected by host area tenure policies affecting

74

opportunities for land purchasing or leasing. This will be less important with regard to

seasonal migration, although availability of land to establish housing for seasonal

immigrants is important. Education policies also can affect possibilities for inter-regional

migration: for example, different languages are now being taught in different regions of

Ethiopia, which will likely increase barriers to inter-regional migration.

6. CONCLUSIONS AND HYPOTHESES

In this paper we have argued that the policy and institutional requirements for

sustainable development depend upon the pathway of development that is pursued, and

that the appropriate development pathways depend upon the factors determining potential

comparative advantage—especially agricultural potential, access to markets and

population pressure. Several generic development pathways have been identified,

including high external input intensification of food production, low external input

intensification of food production, livestock intensification, commercial production of

perishable (mainly horticultural) crops, commercial production of high-value non-

perishable (mainly perennial) crops, rural nonfarm development, and emigration. We

have argued that success of the commercial agricultural development pathways is largely

conditional upon increased food crop production, particularly in areas with poor market

access with potential for high-value perennial crop production. Opportunities for

intensified commercial production of crop and livestock products are very good in much

of the highlands, where agricultural potential is high. The opportunities for agricultural

development in low-potential areas are more limited, although there appears to be good

potential to increase the overall productivity of land use through better management of

75

grazing lands and wastelands, particularly in lower population density areas where

substantial areas of such lands are still present. In higher population density, low-

potential areas with good market access, there may be good potential for investments in

irrigation or rural nonfarm development (though rural nonfarm development may need to

depend upon linkages to sectors such as manufacturing or mining where agricultural

potential is low). In high population density, low-potential areas with poor market

access, emigration is bound to be a major element of people’s livelihood strategies.

Although many policy prescriptions are valid in general, consideration of the key

constraints likely to be binding in the different situations discussed suggests a number of

hypotheses about where public policy and investment priorities should be placed:

1. The highest priority for road development should be areas relatively close

to urban markets where there is high agricultural potential or high

irrigation potential. The highest priority for irrigation development is also

in these areas; particularly dryer areas, although supplemental irrigation in

higher rainfall areas can also be very valuable. Such development could

enable intensive production of food crops, high-value perishable cash

crops, and dairy products. Where irrigation investment is occurring,

adequate attention must be given to institutional issues, such as how water

will be allocated and how losers will be compensated, prior to physical

construction.

2. Where such commercial potential exists, food security is a key to allowing

farmers to exploit the opportunities available. Where farmers have

substantial off-farm income, they may be willing and able to specialize in

76

cash crop production. However, where such opportunities are more

limited (or more limited for income farmers), the risks associated with

cash crop production may require increases in food productivity to enable

greater cash crop production. Increased cash crop production may also

help promote increased food crop production (by enabling purchase of

inputs), so that both food and cash crop production may increase for some

time before greater specialization occurs. Similar complementary growth

of food crop and dairy production may occur in the early phases of

development. Research and extension programs should recognize and

exploit such complementarities.

3. Assuring adequate provision of inputs and credit, and development of the

marketing system are critical to all commercial strategies. Development

of processing facilities and marketing institutions (such as cooperatives

and contract farming), facilitated by a supportive policy environment, are

needed. Research and extension programs will need to take a broader

focus, emphasizing market opportunities for new commodities,

management of animal health, integrated pest management, and integrated

soil nutrient management.

4. Second priority for road development should be high-potential areas

further from markets, especially where population density is high. There

is good potential for intensified production of high-value perennial crops

in these areas if roads are adequate. However, achieving this potential

first requires assuring food security, which is likely to be most economical

77

by increasing productivity in food crop production. For the near term,

subsidies on the cost of transporting fertilizer and other inputs to such

areas (if they are food deficit areas) should be considered as a lower cost

alternative to food aid. As food deficits are eliminated and increased

income from perennial crops generated, such subsidies should be

eliminated. More generally, there is a need to increase the availability and

ensure competitive prices of agricultural inputs. A high priority for such

areas is also elimination of land redistributions and avoidance of

restrictions on land sales or long term leasing, so that the problems of land

tenure insecurity and land fragmentation can be reduced.

5. For low-potential areas without good potential for irrigation (especially

with lower population density), priority should be placed on promoting

increased productivity of all land, including grazing lands and wastelands.

Cautious efforts are needed by governments and NGOs to catalyze

development of local institutions in order to intensify management of

grazing lands. Contingent upon intensified grazing land management,

some intensification of livestock production is possible. Increased

production of small ruminants may be a particularly profitable strategy.

Allocation of wastelands and sloping lands for private tree planting has

potential to substantially reduce the biomass shortage in some areas, as

well as increasing household wealth and incomes, though the potential for

income generation is greater closer to markets. In the near term, food aid

may be needed in such areas, though priority should be given to

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developing alternative sources of income as well as increasing land

productivity.

6. For low-potential areas with good market access, good opportunities for

rural nonfarm development may exist, though these may depend upon

non-agricultural activities, such as manufacturing and mining, given low

agricultural potential. Priority should be on investment in infrastructure

(especially electricity), availability of credit to finance startup enterprises,

and education and training of the labor force.

7. For low-potential areas with poor market access (especially with high

population density), emigration should be facilitated. High priority should

be placed on education and training. Allowing land sales or long-term

leases could also help to facilitate emigration and less intensive use of the

land.

It is important to emphasize that these are only hypotheses, based upon theoretical

considerations and a very limited amount of empirical evidence. Furthermore, there is

certainly substantial variation within the broad types of situations discussed, and across

households having access to different resource endowments. Addressing problems of

poverty, low agricultural productivity and resource degradation will therefore require

strategies that address the needs of the poor as well as the more well-endowed.

Nevertheless, identifying the broad strategies of development that are feasible can help to

identify and recommend targeted strategies for specific situations. Making

recommendations about specific strategies will require more detailed information about

the costs and benefits of alternative strategies in different situations, the priorities and

79

concerns of key stakeholders, and other factors that will determine the likely success or

failure of such recommendations. Policy research is needed to address these issues. We

hope that this paper will help to provide impetus and guidance to such research.

80

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